I 


Sayings  and  Writings  About 
the  Railways 


8C61  '12'NVriVd 
'A  'N  'a 


Sayings  and  Writings  About  the 
Railways 


By  Those  Who  Have  Managed  Them  and 
Those  Who  Have  Studied  Their  Problems 


Published  by  tbe  Railway  Age  Gazette 

:  Woolwor 
ransportati 

1913 


New  York :  Woolworth  BuilcW 
Chicago :  Transportation  Building 


or 


Prefatory  Note 

The  purpose  of  this  publication  is  to  assemble  for 
easy  reading  and  ready  reference  views  and  sugges- 
tions of  men  experienced  in  the  management  of 
railroads,  or  who  have  given  attention  to  their 
problems.  All  observersof  events  realize  that  the 
American  railroads  have  reacneoa  new  crisis  in  their 
development  and  that  a  temperate  solution  of  their 
problems  has  a  very  close  relation  to  the  welfare  of 
business  and  to  the  future  prosperity  of  the  country. 
In  order  that  right  action  may  be  taken,  it  is  necessary 
that  the  information  on  which  this  action  is  based 
shall  be  as  complete  as  possible.  "To  do  justice  we 
must  know  the  truth,"  is  a  sentiment  ascribed  to  Mr. 
Clements,  of  the  Interstate  Commerce  Commission. 

This  is  a  partial  but  representative  collection  of  the 
expressions  of  railroad  authorities  and  students  for 
the  reader  who  may  be  interested  in  them.  Extracts 
have  been  taken  from  hundreds  of  pamphlets  and 
magazine  articles,  scores  of  books  and  many  legal 
papers.  Even  if  these  sources  of  information  were  at 
the  reader's  hand  it  would  be  a  task  for  him  to  go 
through  them. 

As  a  rule,  each  extract  has  its  date.  It  is  impor- 
tant to  bear  this  in  mind  because  of  the  constantly 
changing  statistics  of  trans 


CONTENTS. 

WHAT   RAILROADS   HAVE   DONE  AND   WHAT   THEY   MEAN  TO 
CIVILIZATION  AND  PROSPERITY. 

Page 

Nation's  Growth  Due  to  Railroads — Franklin  K.  Lane. .  *  11 
Wonderful    Work    of    Private    Enterprise  —  Morrill    W. 

Gaines 12 

Railroads  as  Creators  of  Wealth — Robert  Mather 13 

Lincoln's  Prophecy — H.  U.  Mudge 13 

Soundest  Business  in  the  World — E.  8.  Mead 14 

Next  After  Religion  and  the  Public  Schools— J.  J.  Hill.  15 

Largest  Single  Service — Simon  Sterne. 15 

An  Industry  Necessary  to  Life — W.  L.  Ross 16 

Magnitude  of  Our  Railways — H.  S.  Haines 16 

Great  Purchasers  of  Materials — Howard  Elliott 17 

Nation's   Destiny    in   the  Railway   Problem — C.   D.   Kel- 
logg   17 

What  the  Railroads  Handle — Emory.  R.  Johnson 18 

Traffic  Actually  Moved — L.  G.  McPherson 19 

Western  Development — J.  C.  Stubbs 21 

Life  of  All  Business — William  C.  Brown 22 

Growth  of  Interior  United  States — Sidney  Dillon 23 

Ablest  Men  of  the  Day — Arthur  Brisbane 24 

The  Railroad  Strike  of  1894  at  Chicago — L.  F.  Loree. . .  24 

Railroads  and  Prosperity — E.  P.  Ripley 25 

More  Beneficent  than  Philanthropy — R.  W.  Emerson ....  26 

Civilization's  Largest  Factor — Elbert  Hubbard 26 

Vital  Force  of  the  Century — Gardiner  G.  Hubbard 27 

Railroads  Created  Land  Values — Joseph  G.  Cannon 28 

Public  Opinion  and  Railways — W.  W.  Finley 29 

Mileage  and  Capital — London  Times 30 

WHO  OWN  THE  RAILWAYS? 

The  Common  People's  Money — A.  E.  Reynolds 32 

Owners  of  the  Pennsylvania — Samuel  Rea 33 

1,000,000    Owners    Representing    4,000,000    People — H. 

Elliott    34 

Securities  on  Safe  Foundations — Theodore  Roosevelt. ...  35 

People's  Confidence  Built  the  Railroads — Robert  Mather.  35 

Getting  Closer  to  the  People — James  O.  Fagan 36 

Railroad  Bonds  and  Life  Insurance — J.  L.  Laughlin....  36 

Bond  Investments — Comptroller  of  Currency 38 


EFFICIENCY  AND  SAFETY. 

American  Roads  First  in  the  World — W.  M.  Acworth 39 

Practicable  Efficiency — Julius  Kruttsshnitt 40 

Railroads  Lead  in  Efficiency — L.  G.  McPherson 41 

High   Efficiency   Needed — Interstate  Commerce  Commis- 
sion     41 

A  Labor  Leader  on  Efficiency — Warren  8.  Stone 42 

The  Pick  of  All  Industry — L.  F.  Loree 44 

A  Premium  on  Efficiency — Commission  on  Arbitration. . .  44 

Tonic  Effect  of  Good  Service — C.  M.  Keys. 45 

Modern  Freight  Cars — London  Times 47 

Growth  of  the  Passenger  Car — London  Times 47 

Units  of  Railway  Performance — L.  G.  McPherson 48 

More  Burdens  on  the  Railways — Samuel  Rea 49 

Economy  of  Operation — C.  D.  Trueman 50 

Capitalization  and  Service — W.  H.  Williams 51 

Value  of  Large  Systems — J.  J.  Hill 52 

The  Experience  of  1907— J.  J.  Hill 52 

Value  of  Statistics — Neville  Priestly 53 

The  System  of  Statistics — L.  G.  McPherson 55 

Eleven  Thousand  a  Year — G.  A.  Rankin 56 

Accidents  to  Trespassers — Railway  Age  Gazette 57 

Most  of  the  Killed  Trespassers — C.  C.  McChord 57 

What  Safety  Means — T,  S.  Dayton 58 

INCREASE  IN  TAXATION  AND  OTHER  COSTS. 

The  Public  Milch  Cow— J.  J.  Hill 59 

Tar  Increase  of  Thirty  Years — London  Times 59 

Some  of  the  Higher  Costs   of  Railroading — Daniel  Wit- 

lard   60 

THE  RAILROAD'S  DOLLAR. 

Problem  Critical  and  Urgent — F.  L.  Jandron 63 

How  the  Dollar  is  Divided — Howard  Elliott. 63 

The  Value  of  a  Postage  Stamp — Frank  Trumbull 64 

WAGES  AND  LABOR. 

Highest  Wages  and  Lowest  Rates — James  J.  Hill 65 

Compulsory  Arbitration — M.  A.  Knapp 65 

Labor's  View  of  Wage  Arbitration — P.  H.  Morrissey 65 

Sixteen  Million  People — Howard  Elliott 65 

Labor  Holds  Balance  of  Power — Commission  on  Arbitra- 
tion     66 

Labor's  Large  Share — L.  F.  Loree 66 


No  Serious  Strike  Since  Erdman  Act — P.  H.  Morrissey..  6T 

Canadian  Disputes  Act — Commission  on  Arbitration....  68 

Prosperity  and  Railroad  Employees — W.  W.  Finley 69 

Labor's  Demands  on  Railroads — H.  8.  Raines 70 

A  Tribute  to  Railroad  Men — F.  K.  Lane 71 

The  Labor  Organization — W.  J.  Cunningham 71 

Responsibility  of  Labor  Organizations — J.  C.  Stuart. ...  72 
Wages  and  Rates ;  Their  Increases  Compared — H.  8. 

Haines 72 

No  Doctrine  of  Hatred  for  Labor — P.  H.  Morrissey 73 

If  Wages  Are  Increased,  Why  Not  Rates? — Charles  A. 

Prouty 74 

Clearing  House  for  Labor  and  Supplies — William  Bproule  74 

Ten  Millions  Supported  by  Railways — A.  Maurice  Low . .  76 

Ultimate  Wages — Wall  Street  Journal 75 

Permanent  National  Wage  Commission — B.  A.  Worthing- 

ton 77 

Wages  Here  and  in  Europe — W.  C.  Brown 80 

SOME  OF  THE  PRESENT  NEEDS. 

J.  J.  Hill's  Famous  Prediction— J.  J.  Hill 81 

Why  Railroads  Require  More  Money — Samuel  Rea 82 

Labor's  View  of  the  Railroad's  Great  Need — W.  S.  Stone.  83 

Increased  Service  and  More  Money — W.  W.  Finley 83 

Looking  to  the  Future — Judge  Otis 85 

More  Expenses  and  More  Laws — Samuel  Rea 86 

What  is  to  be  the  Answer? — Charles  A.  Prouty 87 

Terminal  Facilities — E.  H.  Harriman 88 

Many  Costly  Improvements — B.  A.  Worthington 88 

Whole    Railway    System    Behind    Requirements — G.    A. 

Rankin    89 

Intelligence  and  Co-operation — F.  A.  Delano 89 

Public  Confidence — Theodore  P.  Shonts 90 

Unfair  Attacks  on  the  Railroads — L.  F.  Loree 91 

The  Legislative  Handicaps — B.  L.  Winchell 92 

Greater  Movement  of  Cars — James  J.  Hill 93 

New  Cars  Cost  More — James  J.  Hill 93 

Railway  Management — Fred.  Wilbur  Powell 94 

Immense  Outlay  of  Money — Theodore  Roosevelt 94 

Better  Transportation — Theodore  Roosevelt 96 

A  Reasonable  Return — New  York  Chamber  of  Commerce.  96 

Cannot  Force  Private  Capital — Charles  A.  Prouty 97 

Loading  and  Unloading  Facilities — E.  D.  Sewall 97 

"WHAT   THE   TRAFFIC   WILL   BEAR." 

An  Unfortunate  Expression — Frank  Trumbull 98 

Tendency  of  Rates  Downward — Samuel  Rea 98 


8 

The  Distribution  of  Rates — Wall  Street  Journal 99 

The  Underlying  Principle — Franklin  Escher 101 

A  System  in  the  Public  Interest— W.  M.  Acworth 102 

The  Evolution  of  Rates — R.  S.  Baker 103 

What  the  Service  is  Worth — Franklin  Escher 105 

RATES  AND  RATE-MAKING. 

Present  Rate  Very  Small — Howard  Elliott 106 

Rates  for  Grain  and  Other  Produce — D.  Miller 106 

What  a  Slight  Increase  Would  Do — Benjamin  F.  Bush..   107 

American  Rates  the  Lowest — Horace  Porter 107 

The  Economic  Principles — Arthur  T.  Hadley 108 

Rates  Not  Based  on  Value  of  Railroad — R.  8.  Lovett. . . .  109 
Variations  in  Rates — Interstate  Commerce  Commission..  109 
Other  Prices  that  Enter  into  Cost — Samuel  W.  McCall. .  110 

On  the  Lines  of  the  Common  Law — S.  O.  Dunn Ill 

Freight  Rates  on  Food  Products — W.  W.  Finley 112 

Excessive  Rates  Injurious  to  Railroads — E.  P.  Ripley...   113 

General  Principle  of  Rate-making— Walker  D.  Eines 113 

Passenger  Rates — Howard  Elliott 114 

The  2-Cent  Maximum  Fare — Howard  Elliott 114 

Importance  of  Fair  Rates — L.  E.  Johnson 115 

How  the  Present  System  of  Rates  Grew — R.  S.  Lovett..  116 
Development  of  Railway  Tariffs — Charles  A.  Prouty. . . .  118 
What  is  a  Reasonable  Rate? — Interstate  Com.  Commfn..  120 

"      "  "  "  "     — W.  M.  Acworth 120 

••      "  "  "  "     —H.   C.  Adams 121 

"      ""  "  "     —F.A.Delano 121 

"      "  "  "  "     —Henry  Fink 121 

"      "  "  "  "     — W.  W.  Finley 122 

"      "  "  "  "     —  W.  D.  Hines 122 

"      ""  "  "     — R.  S.  Lovett 122 

"      ""  "  "     — E.  P.  Ripley.. 123 

"      "  "  "  "     — T.  Van  den  Berg 123 

"      ""  "  "     — F.  W.  Whitridge. 123 

"      "  "  "  "     — Daniel  Willard 123 

"      ""  "  "     — W.  H.  Williams 124 

Railroad  Rate  Not  a  Tax — L.  G.  McPherson 124 

Good  Credit  and  a  Fair  Return — Samuel  Rea 125 

Purchasing  Power  of  Railway  Receipts — New  York  Sun.  125 

Seven  Cents  for  All  a  Man  Wears — L.  F.  Loree 126 

Laws  of  Trade — A.  T.  Hadley 126 

Rates  and  Prices — L.  G.  McPherson 126 

Conditions  that  Control  Charges — H.  T.  Newcoml). 127 

Value  of  the  Article — A.  Van  Wagenen 128 

Why  Rates  Can  Be  Advanced — Franklin  Escher 129 


9 

What  the  Railroads  Get — L.  G.  McPherson 129 

Rates  on  Staple  Articles — L.  G.  McPherson 131 

Rates  in  Different  Countries — Robert  Mather 132 

Steady  Decrease  in  Rates — M.  W.  Gaines 133 

REGULATION  AND  LEGISLATION. 

Congress  and  the  States — Supreme  Court 135 

Not  at  the  Mercy  of  Legislative  Caprice — Supreme  Court  135 

National  Control  of  Interstate  Commerce — W.  H.  Taft..  136 

Federal  Authority  Over  Railroads — L.  F.  Loree 136 

Progress  of  Regulation — Commission  on  Arbitration 137 

Regulation  Here  to  Stay — Darius  Miller 138 

Cost  of  Regulation — Howard  Elliott 139 

Ample  Machinery  for  Regulation — Daniel  Willard 140 

Ignorance  and  Legislation — W.  L.  Ross 141 

Too  Many  State  and  National  Laws — 8.  0.  Dunn 142 

How  the  Railroad  is  Tied — A.  Maurice  Low 142 

The  Scheme  of  Legislation — M.  A.  Knapp 143 

Railroads  and  Other  Industries — J.  L.  Laughlin 144 

Excess  of  Regulation — Henry  Fink 145 

A  Better  Understanding — Horace  Porter 145 

Creation  of  Permanent  Conditions — W.  L.  Ross 146 

Limits  of  Regulation— W.  W.  Finley 146 

Too  Many  Laws — Howard  Elliott 147 

Inherent  Rights  of  the  Railroads — L.  G.  McPherson....  148 

Why  Not  Regulate  These  ? — Railway  Record 149 

Effect  of  Radical  Legislation — Howard  Elliott 149 

Proof  of  Experience — Robert  Mather 150 

Why  New  Railroads  Are  Not  Being  Built — J.  P.  Morgan.  151 

A  New  Account  with  the  Future — Daniel  Willard 152 

Cost  of  Regulation — W.  J.  Cunningham 153 

A  Conservative,  Wise,  Just  Policy — B.  L.  Winchell 154 

Flood  of  Legislation — Howard  Elliott 155 

CAPITAL  AND  CREDIT. 

Railways  Must  Have  Adequate  Capital — M.  A.  Knapp . . .  157 

Way  to  Strengthen  Railway  Credit — B.  F.  Bush 157 

Value  of  Securities — R.  S.  Lovett 158 

Land  Grants — Cleveland  and  Powell 159 

Service,  Dividends,  and  Prosperity — B.  L.  Winchell 160 

Free  Play  for  the  Railroad  Builder — 8.  W.  McCall 161 

Backbone  of  Railroad  Credit — Wm.  Sproule 162 

Few  New  Issues  of  Securities — Franklin  Escher 163 

Labor's  View  of  Railway  Surplus — W.  8.  Carter 164 

Another  Labor  View  of  Surplus — P.  H.  Morrissey 164 

Railroads  and  the  Money  Market — 8.  O.  Dunn 165 

An  Appeal  to  Reason — W.  C.  Brown 165 

The  Unending  Way  of  Capital — C.  M.  Keys 166 


10 

Interest  of  the  Shipper — Franklin  Escher 167 

A  Surplus  for  Emergencies — J.  J.  Hill 168 

The  Railroad's  Surplus — J.  J.  Hill 168 

Theory    of    Railroad    Stock    Issues — Railroad    Securities 

Commission   169 

New  Issues  of  Bonds — Railroad  Securities  Commission..  170 
What   Constitutes   a   Reasonable   Return? — Railroad   Se- 
curities Commission 171 

Amount   of    Additional    Capital    Required — Railroad   Se- 
curities   Commission 172 

GOVERNMENT  OWNERSHIP  AND  VALUATION. 

What  State  Ownership  Means — Arthur  T.  Hadley 174 

President  Wilson's  Position — Woodrow  Wilson 174 

President  Taft's  Views— William  H.  Taft 175 

Justice  Hughes  Opposed — Charles  E.  Hughes. 176 

'Government  a  Bad  Business  Agent — J.  G.  Schurman ....  176 

A  Hazardous  Test — James  Bryce 176 

State  Ownership  in  Europe — Evelyn  Cecil 177 

Results  of  Government  Ownership — E.  R.  Dewsnup 178 

Hard  Blow  to  the  Credit  of  France — Yves  Guyot 179 

A  Huge  Political  Machine — J.  C.  Jeffrey 179 

Prance  a  Bad  Railway  Manager — Pierre  Leroy-Beaulieu.  180 

Where  Railroads  Are  State  Owned — Slason  Thompson. . .  180 

Stimulus  of  Private  Ownership — Arthur  T.  Hadley 181 

Danger  of  Excessive  Regulation — W.  W.  Finley 182 

Built  by  Private  Funds — J.  F.  Holden 183 

Would  Imperil  Free  Government — J.  J.  Hill 183 

Ownership  and  Politics — Fairfax  Harrison 184 

Effect  on  States — Governor  Foss 184 

Elements  of  Value — W.  D.  Hines 185 

Rates  and  Physical  Valuations — Fairfax  Harrison 185 

RAILWAYS  AND   CANALS. 

Canals  Only  Supplementary — W.  M.  Acworth 187 

Different  Kinds  of  Waterways — L.  G.  McPherson 187 

•Cost  by  Canal  Greater — H.  G.  Moulton 190 

Senator  Burton's  Statement — T.  E.  Burton 190 

Rates   of   Railways  and  Erie   Canal    Compared — Bureau 

of  Railway  Economics 191 

FIVE  POINTS  IN  THE  SITUATION — Frederick  A.  Delano..  193 

SEVERE  TESTS  OF  RECENT  YEARS — Logan  G.  McPherson. .  197 

STATISTICS  FROM  PUBLICATIONS  OF  THE  BUREAU  OF  RAIL- 
WAT   ECONOMICS  AND  OTHER  SOURCES 203 

INDEX  TO  NAMES 237 


WHAT  RAILROADS  HAVE  DONE  AND 
WHAT  THEY  MEAN  TO  CIVILIZA- 
TION AND  PROSPERITY. 


Nation's  Growth  Due  to  Railroads 

This  country  cannot  grow  without  adequate  trans- 
portation facilities.  The  railroad  is  our  common 
highroad;  it  is  not  a  luxury;  it  is  not  a  concern  in 
which  the  farmer  and  the  manufacturer  alone  are 
interested;  it  is  an  essential  to  the  commercial  life  of 
our  people,  almost  as  necessary  as  the  land  itself, 
for  we  have  grown  up  as  a  people  to  be  physically 
dependent  upon  our  railroads.  No  other  people  are 
so  bound  up  as  are  we  in  economic  interdependence. 
No  one  community  in  all  this  land  lives  to  itself.  We 
have  grown  as  railroads  were  built.  We  have  made 
a  community  of  a  continent.  The  freight  rate?  deter- 
mines where  we  shall  mine  and  how  we  shall  mine; 
where  we  shall  manufacture  and  how  we  shall  manu- 
facture; where  we  shall  plant  and  what  we  shall 
plant;  what  we  shall  eat  and  wherewithal  we  shall  be 
clothed.  With  a  national  system  of  railways  that 
penetrates  into  the  remotest  sections  of  the  country, 
a  service  that  is  dependable  and  adapted  to  our  in- 
dustrial life,  and  rates  so  low  as  to  make  the  least 
possible  tax  upon  trade,  the  United  States  as  a  com- 
mercial and  industrial  entity  will  realize  itself  fully. 
If,  on  the  other  hand,  we  have  too  few  railroads,  giv- 
ing meager  service  and  following  the  false  policy  of 
exacting  high  tolls,  the  nation's  growth  will  be  by  so 
much  retarded. — Franklin  K.  Lane:  What  I  Am  Try- 
ing to  Do.  World's  Work,  March,  1913. 

11 


12 


Wonderful  Work  of  Private  Enterprise 

No  other  country  is  so  dependent  on  railroads.  The 
United  States  has  245,000  miles  of  line,  40%  of  the 
mileage  of  the  world.  Its  tonnage  of  freight  moving 
by  rail  is  greater  than  that  of  any  other  two  nations, 
not  excepting  our  formidable  industrial  rivals,  Ger- 
many and  the  United  Kingdom.  The  average  haul, 
about  250  miles,  is  four  times  the  average  abroad,  so 
that  the  255,016,910,451  ton-miles  of  1910,  the  last 
year  reported,  constitute  a  freight  traffic  more  than 
twice  as  great  as  that  of  all  the  rest  of  the  globe.  In 
population  we  have  one-sixteenth  of  the  world's  total 
and  one-fourth  that  of  Europe.  Freight  transporta- 
tion per  capita  in  the  United  States  is  thirty  times  the 
world's  average  and  nine  times  Europe's.  With  inland 
coal,  iron,  and  grain,  and  land-bound  cities  scattered 
across  a  continent,  we  live  by  means  of  railroads 
that  we  have  built.  In  our  material  development  they 
always  have  been,  and  always  will  be,  the  prime  force. 
The  reclaimers  of  waste  places,  the  builders  of  cities, 
the  awakeners  of  opportunity,  to  our  growth  as  a 
nation  their  growth  is  still  essential. 

Under  private  ownership  the  railroads  of  the  United 
States,  built  and  operated  for  profit,  have  grown  far 
beyond  the  measure  of  the  growth  in  other  countries, 
where,  for  the  most  part,  railroads  have  been  the  care 
of  the  government.  Our  mileage  per  capita  is  five 
times  that  of  Europe  and  ten  times  that  of  the  world 
at  large.  Stocks  and  bonds  outstanding  per  mile  of 
line  are  a  little  over  half  the  average  amount  per  mile 
on  the  foreign  railways,  and  the  freight  traffic  per 
mile  is  three  times  as  great.  Rates  per  ton-mile  are 
lowest  in  the  United  States — less  than  half  of  the 
average  charged  in  other  lands.  Private  enterprise, 
dominated  by  ambition,  has  fostered  the  growth  of 


13 


railways  in  this  country  not  only  in  length  and  carry- 
ing capacity,  but  in  the  direction  of  cheapness  and 
efficiency. — Horrill  W.  Games:  A  Living  Rate  for  the 
Railroads.  Yale  Review,  1910. 

Railroads  as  Creators  of  Wealth 

We  cannot  count  our  wealth  and  greatness  in  terms 
that  do  not  point  for  their  significance  to  our  lines  of 
transportation.  We  say  that  we  take  annually  out 
of  the  soil  six  billions  of  dollars.  But  these  fabulous 
values  result  not  so  much  from  the  fact  that  millions 
•of  bushels  of  corn  and  oats  and  wheat,  of  tons  of  hay 
and  of  bales  of  cotton,  are  grown  and  harvested,  as 
from  the  circumstance  that  a  system  of  transporta- 
tion, unequalled  on  the  globe  for  efficiency  and  cheap- 
ness of  charge,  is  ready  to  carry  these  products  to 
profitable  markets.  Our  marvelous  crops  would  count 
for  nothing  if  forced  to  lie  in  the  fields  where  they 
grow,  or  driven  to  seek  such  markets  only  as  the 
farmer's  team  could  reach.  The  cotton  crop,  which 
brings  to  our  shores  annually  nearly  half  a  billion 
dollars  of  foreign  gold,  would  be  but  a  fruitless  bur- 
den on  southern  winds  if  there  were  no  railways  to 
•carry  it  to  the  seaboard.  We  take  from  our  mines 
and  forests  and  factories  twenty  billions  of  dollars 
each  year,  but  without  means  of  transportation  these 
costly  products  would  be  worthless  junk. — Robert 
Mather:  The  Railroad  Problem.  Address  before  Chi- 
cago Association  of  Commerce,  October  12,  1907.. 

Lincoln's  Prophecy 

I  am  here  reminded  of  an  incident  that  is  recorded 
in  the  archives  of  the  Rock  Island  Company.  This 
company  was  the  first  to  reach  and  bridge  the  Missis- 


14 


sippi  River.  There  was  much  opposition  on  the  part 
of  the  river  shipping  interests,  who  sought  to  prevent 
the  bridge.  Abraham  Lincoln  was  at  that  time  a 
Rock  Island  attorney,  and  in  his  argument  said:  "It 
is  not  at  all  improbable  that  the  traffic  crossing  thi& 
bridge  may,  at  some  future  time,  be  even  greater  than 
that  passing  up  and  down  the  river."  How  correctly 
he  prophesied  you  will  see  when  I  tell  you  that  the 
average  number  of  freight  and  passenger  cars  now 
passing  over  this  bridge  is  about  1,400  per  day,  and 
there  are  now  some  twenty  railroad  bridges  over  the 
Mississippi  River. — Address  of  H.  U.  Mudge,  at  re- 
ception and  banquet  given  by  the  Commercial  Club  of 
Topeka,  Kansas,  April  11,  1911. 

Soundest  Business  in  the  World 

The  American  railway  industry,  for  its  size,  and 
considering  the  large  number  of  companies  operating 
it,  is  the  soundest  and  strongest  business  in  the  world. 
Observe  first  the  size  of  the  plant  and  personnel :  mile- 
age, 359,000;  cars,  2,408,589;  locomotives,  65,310;  em- 
ployees, 1,699,420.  Over  10,000,000  Americans  draw 
their  living  from  the  railroads ;  and  the  business  which 
is  conducted  by  this  great  organization  is  worthy  of  it. 
In  1912  American  railroads  transported  1,817,562,049 
tons  of  freight  and  1,019,658,605  passengers.  Ex- 
pressed on  a  mileage  basis,  these  figures  are  even  more 
striking.  Over  every  mile  of  American  railroad  in 
1910  were  carried  1,071,086  tons  of  freight  and  138,169 
passengers.  This  immense  business  was  done,  more- 
over, at  a  very  moderate  cost  to  the  shipper  and  pas- 
senger, a  fact  proven  by  an  average  freight  rate  of 
.748  cent,  and  a  passenger  rate  of  2.22  cents.  No  other 
industry,  moreover,  performs  its  service  or  furnishes 
its  goods  at  so  small  a  margin  of  profit.  The  pas- 


15 

senger  business,  in  the  opinion  of  the  best  informed1 
railway  men,  is  operated  without  profits,  and  out  of 
the  three-fourths  of  a  cent  received  for  each  ton  car- 
ried one  mile,  it  is  a  safe  estimate  that  not  more  than 
one-fourth  cent  represents  profit. — Edward  Sherwood 
Mead:  The  American  Railway  Industry.  Lippincott's 
Magazine,  June,  1913.  • 

Next  After  Religion  and  the  Public  School 

While  the  railways  of  the  United  States  may  have 
mistakes  to  answer  for,  they  have  created  the  most 
effective,  useful,  and  by  far  the  cheapest  system  of 
laud  transportation  in  the  world.  This  has  been  ac- 
complished with  very  little  legislative  aid  and  against 
an  immense  volume  of  opposition  and  interference 
growing  out  of  ignorance  and  misunderstanding.  It 
is  not  an  exaggeration  to  say  that  in  the  past  history 
of  this  country  the  railway,  next  after  the  Christian 
religion  and  the  public  school,  has  been  the  largest 
single  contributing  factor  to  the  welfare  and  happi- 
ness of  the  people. — James  J.  Hill:  Highways  of 
Progress. 

Largest  Single  Service 

Of  all  the  factors  that  have  contributed  during  this 
century  to  the  growth  of  wealth,  to  the  increase  of 
material  comfort,  and  to  the  diffusion  of  information 
and  knowledge,  the  railway  plays  the  most  prominent 
part.  It  has  widened  the  field  for  the  division  of 
employments ;  it  has  cheapened  production ;  it  has 
promoted  exchange,  and  has  facilitated  intercom- 
munication. In  its  aggregate  it  represents  a  larger 
investment  of  capital  than  any  other  branch  of  human 
activity;  and  the  service  that  it  renders  and  has  ren- 
dered to  society  is,  both  from  industrial  and  commer- 
cial points  of  view,  greater  than  is  rendered  by  any 


16 


other  single  service  to  which  men  devote  their  activi- 
ties.— Simon  Sterne:  Article  "Railways"  in  Cyclo- 
pcedia  of  Political  Science. 

An  Industry  Necessary  to  Life 

Without  the  transportation  industry  life  itself,  ex- 
cept of  the  simplest  sort,  would  be  almost  impossible. 
Everything  on  earth,  even  man  himself,  must  be 
moved  before  it  can  have  value,  and  the  more  highly 
developed  the  transportation  facilities  of  a  people, 
the  more  rapid  their  development  industrially  and 
socially.  The  rapid  and  cheap  movements  of  prod- 
ucts so  increases  their  values  that  the  workers  and 
producers  get  more  for  their  labor,  while  the  con- 
sumers at  the  same  time  pay  less — the  carrier  getting 
less  than  formerly  for  his  services  in  moving  the 
products  from  the  producer  to  the  consumer. — W.  L. 
Ross:  Address  before  Transportation  Association  of 
Milwaukee,  May  22,  1909. 

Magnitude  of  Our  Railways 

Consider  the  magnitude  of  this  system  [American 
railroad  system]  !  Its  mileage  about  equals  the  ac- 
cepted distance  of  the  moon  from  the  earth.  Its  em- 
ployees number  one  out  of  every  twelve  of  our  adult 
male  population.  The  capital  invested  in  it  is  esti- 
mated to  represent  one-eighth  of  the  total  wealth  of 
the  country,  and  its  annual  revenues  to  be  three 
times  those  of  the  Federal  Government.  We  should 
recognize  that  this  system  has  not  been  superadded  to 
long-existing  means  of  internal  transportation.  It 
has  not  superseded  other  national  highways,  for  there 
were  none  others  before  it.  From  the  Atlantic  coast, 
hemmed  in  by  almost  continuous  ranges  of  mountains, 
it  opened  the  way  to  the  granaries  of  the  Mississippi 


17 

Valley  and  of  the  Western  prairies,  and  unlocked  the 
treasure  vaults  hidden  deep  beneath  the  Rocky  Moun- 
tains. It  has  reversed  the  order  of  nature  by  divert- 
ing the  course  of  trade  from  those  extensive  regions, 
against  the  mighty  currents  flowing  to  the  Gulf  of 
Saint  Lawrence  and  to  the  Gulf  of  Mexico,  and  has 
deflected  that  course  to  our  Atlantic  ports.  It  has 
undone  the  work  of  Vasco  da  Gama  and  of  Magellan, 
and  has  given  to  the  route  across  the  North  American 
continent  that  commerce  with  the  Orient  which  the 
Portuguese  won  from  Marco  Polo  and  the  Venetians. — 
H.  S.  Haines:  Problems  in  Railway  Regulation. 

Great  Purchasers  of  Materials 

The  railways  are  the  great  purchasers  of  materials 
of  many  kinds,  and  the  moment  they  are  forced  to 
stop  buying  the  effect  begins  to  be  felt  in  the  forest, 
the  mine,  the  mill,  and  the  factory. — Howard  Elliott  : 
Address  at  the  Montana  State  Fair,  Helena,  Montana, 
September  26,  1910. 

Nation's  Destiny  in  the  Railway  Problem 

The  railroads  have  a  great  problem  to  work  out, 
and  the  destiny  of  tliis  country  is  inextricably  bound 
up  in  that  problem.  The  only  way  to  settle  it  is  in 
fairness,  rectitude,  and  righteousness.  The  people 
continually  want  better  service,  faster  trains,  more 
elegant  accommodations,  more  safety — all  of  which 
are  perfectly  legitimate  demands — but  the  carrying 
out  of  those  demands  costs  money,  and  the  people 
ought  to  be  willing  to  pay  for  them.  Everything  the 
railroads  use,  just  like  everything  every  one  else  uses, 
costs  more  than  it  used  to,  and  it  costs  the  railroads 
more,  just  as  it  costs  everybody  else  more. — C.  D. 
Kellogg,  in  Railway  World,  January,  1913. 


18 


What  the  Railroads  Handle 

The  general  facts  brought  out  in  the  brief  survey 
of  the  main  sources  of  traffic  in  the  five  large  physical 
subdivisions  of  the  United  States  may  be  illustrated 
and  their  effects  noted  by  a  summary  tabular  analysis 
of  the  principal  classes  of  commodities  handled  by 
typical  railroad  systems  located  in  different  sections 
of  the  country.  The  data  presented  in  the  following 
table  are  taken  from  the  annual  reports  of  the  car- 
riers. The  grouping  of  commodities  is  that  required 
by  the  Interstate  Commerce  Commission: 

CLASSIFICATION   OF  FREIGHT   TONNAGE   OF   TYPICAL 
RAILROADS,    1908. 

Penna.  R.  K.      C.  &  O.  So.  Ry.        C.  of  Ga. 

Total  tonnage „.    182,083,103        16,540,833        26,654,389       4,700,841 


Products  of  agricul- 
ture   

Per  cent. 
5  94 

Per  cent. 
4.56 

Per  cent. 
11  04 

Per  cent. 
22  39 

Products    of    a  n  i  - 
mals  

1.78 

.69 

1.22 

1.41 

Products  of  mines.. 
Forest  products  
Manufactures  
Merchandise  

65.45 
4.78 
18.51 

.77 

70.79 
10.27 
5.99) 
3.18  V 

38.77 
17.76 

31  21 

24.93 
19.11 

32  16 

Miscellaneous  

2.77 

4.52  j 

Total.. 


100.00 


100.00  100.00 

Rock  Island.   Santa  Fe. 
15,877,640         16,610,910 

Per  cent. 

26.37 

7.92 

27.82 

12.26 


100.00 

St.  Paul. 
Total  tonnage 26,189,853 

Per  cent. 

Products  of  agriculture 21.537 

Products  of  animals 6.894 

Products  of  mines *28.518 

Forest  products 12.944 

Manufactures 17.267 

Merchandise...  1  J 

Miscellaneous./ 12'84(  \ 

Total 100.000  100.00  100.00 

— Emory  R.  Johnson:  Sources  of  American  Railway 
Freight  Traffic.  Bulletin  of  the  American  Geo- 
graphical Society,  April,  1910. 


17.92 


Per  cent. 
22.88 
7.92 
32.05 
12.41 
17.95 


6.79 


19 


Traffic  Actually  Moved 

To  ascertain  exactly  what  traffic  is  actually  moved 
over  a  mile  of  railway  in  one  day  two  railway  com- 
panies were  respectively  asked  to  compile  this  in- 
formation for  their  respective  lines.  One  is  an  eastern 
trunk  line  having  a  greater  density  of  traffic  than  any 
other  in  the  United  States,  and  its  traffic  is  typical 
of  the  manufacturing  region  which  it  serves.  The 
other  is  a  railway  of  the  Middle  West  whose  traffic  Is 
naturally  typical  of  the  grain-raising,  meat-producing, 
cotton-growing,  lumber-producing  region  which  it 
serves.  Officers  of  these  railways  have  furnished  the 
information  here  set  forth. 

Over  one  mile  of  the  eastern  railway  pass  in  one 
day  794  freight  cars,  105  passenger  cars,  and  46  loco- 
motives. Over  one  mile  of  the  western  road  pass  every 
day  198  freight  cars,  27  passenger  cars,  and  12  loco- 
motives. 

Over  one  mile  of  the  eastern  road  are  hauled  in 
one  day  13,494  tons  of  freight  and  1,170  passengers; 
over  one  mile  of  the  western  road  in  one  day  2,654 
tons  of  freight  and  250  passengers. 

By  the  application  of  these  governmental  statistics 
of  average  consumption  to  the  per  mile  per  day  ton- 
nage of  the  two  railways  we  obtain  the  following  re- 
sults : 

The  eastern  railway  hauls  on  the  average  over  each 
jnile  each  day  enough  cement,  brick,  and  lime  to  sup- 
ply 1,976  persons  for  one  year ;  enough  coal  and  coke 
to  supply  1,594  persons  one  year;  enough  cotton  to 
supply  794  persons  one  year;  dressed  meat  to  supply 
318  persons  one  year;  fruit  and  vegetables  to  supply 
1,176  persons  one  year;  iron  for  11,146  persons;  ores 
for  329  persons ;  poultry,  game,  and  fish  for  650  per- 
sons ;  stone  and  sand  for  1,308  persons ;  sugar  for  825 


20 


persons;  wines,  Hquors,  and  beers  for  381  persons; 
wool  for  1,270  persons  for  one  year.  The  freight  per 
mile  per  day  thus  expressed  aggregated  10,552  tons, 
leaving  2,942  tons,  or  nearly  6,000,000  pounds,  of  other 
commodities  not  so  classified  that  the  average  con- 
sumption can  be  ascertained. 

The  western  railway  hauls  on  the  average  over  each 
mile  each  day  enough  cement  brick,  and  lime  to  sup- 
ply 302  persons  for  one  year;  enough  coal  and  coke 
to  supply  56  persons  for  one  year;  enough  cotton  to 
supply  1,698  persons  for  one  year;  enough  dressed 
meats  and  other  packing-house  products  to  supply 
1,045  persons  for  one  year ;  enough  flax  and  other  seed 
for  17  persons  for  one  year ;  enough  flour  for  455  per- 
sons; other  mill  products  for  569  persons;  petroleum 
and  other  oils  for  633  persons;  poultry,  game,  and 
fish  for  seven  persons;  fruit  and  vegetables  for  249 
persons ;  grain  for  146  persons ;  hay  and  straw  for  14 
persons;  iron  for  110  persons;  rice  for  1,122  persons; 
salt  for  1,896  persons ;  stone  and  sand  for  16  persons ; 
sugar  and  molasses  for  1,089  persons;  wines,  liquors, 
and  beers  for  297  persons.  The  1,106  tons  of  lumber 
which  comprise  about  two-fifths  of  the  daily  traffic 
over  one  mile  of  this  railway  are  enough  to  build  44 
two-story,  eight-room  wooden  houses  of  medium  size. 
The  lumber  hauled  by  this  road  in  the  course  of  a 
year  is  sufficient  in  quantity  to  build  over  45,000  such 
houses. 

In  order  to  conduct  this  daily  transportation,  which 
consists  on  the  eastern  railway  of  1,170  passengers  and 
13,494  tons  of  freight  per  mile,  to  say  nothing  of  the 
mail  and  express,  there  is  required  90,600  pounds  of 
coal  as  fuel  for  the  locomotives,  3%  pounds  of  oil  for 
lubrication,  and  %  pound  of  waste  for  the  journal 
boxes. 

The  similar  performance  of  the  western  road  calls 


21 


for  the  services  of  various  classes  of  employees,  offi- 
cers, stationmen,  trainmen,  trackmen,  and  shopmen 
to  an  extent  equivalent  to  the  total  service  of  10  men 
for  one  day.  For  the  250  passengers  and  2,653  tons 
of  freight  and  the  mail  and  express  which  it  hauls 
over  one  mile  in  one  day  it  receives  $30.82,  of  which 
$19.10  is  paid  out  for  expenses  of  operation,  $1.39  as 
taxes,  $5.08  as  interest,  and  $2.82  for  dividends,  the 
remainder  going  for  miscellaneous  items  and  services. 
It  is  repeated  that  all  the  statements  in  this  article 
are  of  averages,  but  they  are  carefully  computed  aver- 
ages that  give  a  fair  indication  of  the  work  that  the 
railways  are  doing  mile  by  mile,  day  by  day. 

The  average  performance  for  each  mile  for  each  day 
multiplied  by  365  days  gives  the  total  performance 
for  each  mile  for  the  year.  This  multiplied  by  240,000, 
*the  aggregate  number  of  miles,  gives  the  total  perform- 
ance of  all  the  railways  of  the  United  States  for  the 
entire  year.  It  will  be  perceived  that  a  difference  of 
one  cent  a  mile  a  day  in  the  earnings  or  the  expenses 
makes  a  difference  of  $876,000  a  year ;  a  difference  of 
10  cents  a  mile  a  day  a  difference  of  $8,760,000  a  year ; 
a  difference  of  $1  a  mile  a  day  amounts  to  $87,600,000 
for  the  year,  and  this  is  very  nearly  one-third  of  the 
net  dividends  paid  by  all  the  railways  of  the  United 
States  for  the  entire  fiscal  year  1910. — L.  O.  McPher- 
son:  The  Times  (London),  American  Raihvay  'Num- 
ber, June  28,  1912. 

Western  Development 

Today  the  gauge  of  productive  industry  is  the  "T" 
rail.  Seven  distinct  lines  of  railroad  now  span  the 
continent  from  the  Missouri  River  to  the  Pacific 
Ocean.  Inclusive  of  Texas,  the  total  length  of  main 
line  is  over  66,000  miles.  The  wonders  they  have 
worked  in  one  generation  is  but  an  earnest  of  what 


22 


they,  unaided,  shall  accomplish  in  the  generation  be- 
ginning with  the  current  year.  But  there  are  fifty- 
nine  hundred  miles  of  additional  main  line  of  rail- 
road, the  projection  of  which,  within  this  territory, 
is  not  only  acknowledged,  but  much  of  the  work  has 
been  contracted  and  is  now  largely  in  course  of  con- 
struction. To  these  confessed  projections  it  will  be 
safe  to  add  from  1,000  to  1,500  miles  which  are  un- 
avowed.  Much  of  this  new  construction  will  develop 
and  serve  virgin  territory.  If  the  promise  of  the  fu- 
ture be  measured  by  the  accomplishment  of  the  past, 
and  due  weight  is  given  to  the  industrial  energy 
awakened  by  the  cognate  force  of  electricity,  what 
more  need  be  said  in  exposition  of  my  subject? — J.  C. 
Stubfts:  The  Railroads  and  Western  Development. 
Railway  World,  May  4,  1906. 

0 

Life  of  All  Business 

Agriculture,  manufacturing,  and  merchandising,  in 
the  free  and  untrammeled  rise  and  fall  of  prices  to 
meet  changing  conditions,  act  promptly,  almost  auto- 
matically. The  great  business  of  transportation 
alone,  vital  to  the  prosperity,  yea,  the  very  life  of  all 
the  others,  is  hedged  about  and  restricted  by  legisla- 
tive enactment  and  supervision  of  commissions,  Na- 
tional and  in  almost  every  State.  In  addition  to  this, 
every  act,  every  change  in  tariff,  made  or  suggested 
by  the  railroads,  is  watched  and  questioned  by  hun- 
dreds of  alert,  aggressive  associations  in  every  city 
in  the  Union. 

I  do  not  dispute  this  right  of  the  nation  and  the 
States  to  regulate  the  corporations  they  have  created ; 
I  do  not  question  the  right  and  duty  of  these  associa- 
tions to  most  minutely  scan  and  closely  inquire  into 
changes  that  may  affect  their  interests;  but  I  want 


23 


to  urge  upon  these  commissions,  both  of  the  nation 
and  the  States,  the  all-important  necessity  of  exer- 
cising the  great  powers  that  have  been  conferred  upon 
them  with  conservatism  and  wisdom.  Samson  pos- 
sessed power — the  ruins  of  the  temple  attest  the 
fact — but  I  fail  to  find  in  any  history,  sacred  or  pro- 
fane, a  suggestion  that  that  power  was  wisely  exer- 
cised.— William  C.  Brown:  Address  at  annual  dinner 
of  Railway  Young  Men's  Christian  Association  of 
Columbus,  Ohio,  February  4,  1911. 

Growth  of  Interior  United  States 

No  fact  among  all  the  great  politico-economical 
facts  that  have  illustrated  the  world's  history  since 
history  began  to  be  written  is  so_full  of  human  in- 
terest, or  deals  with  such  masses  of  mankind,  as  the 
growth  of  the  interior  United  States  since  the  rail- 
way opened  to  the  seaboard  these  immense  solitudes. 
The  irruption  of  the  northern  tribes  upon  the  Roman 
Empire  bears  no  proportion  to  it,  and  was  destructive 
in  its  results;  and  we  may  say  the  same  as  to  the 
Napoleonic  wars.  These  are  among  the  most  cele- 
brated events  of  commonwealths  on  our  planet,  be- 
ginning and  ending  in  bloodshed  and  enormous  waste 
of  capital.  But  within  fifty  years  over  thirty  mil- 
lions of  people  have  been  transplanted  to  or  produced 
upon  vast  regions  of  hitherto  uninhabited  and  com- 
paratively unknown  territory,  where  they  are  now 
living  in  comfort  and  affluence  and  enjoying  a  degree 
of  civilization  second  to  none  in  the  world,  and  greatly 
superior  to  any  that  is  known  in  Europe  outside  of 
the  capitals.  And  this  could  not  have  happened  had 
it  not  been  for  the  railway. — Sidney  Dillon:  The  West 
and  the  Railroads.  North  American  Review,  April, 
1891. 


24 


Ablest  Men  of  the  Day 

The  newspapers  view  the  railroads  as  wonderful 
proofs  of  the  highest  degree"  of  efficiency  and  ability. 
The  biggest  work  of  an  age  always  attracts  to  itself 
the  biggest  men  of  the  age.  When  the  great  work  of 
the  world,  was  painting,  in  the  days  of  the  Medicis, 
the  greatest  men  in  the  world  were  painters.  Michael 
Angelo  was  the  greatest  engineer,  the  greatest  archi- 
tect, the  greatest  sculptor,  of  his  day,  and  probably 
in  every  other  way  the  greatest  man.  Leonardo  da 
Vinci  was  the  greatest  military  engineer,  the  greatest 
road  and  fort  builder ;  with  the  power  of  two  Jeffreys, 
he  could  take  an  iron  bar  and  bend  it  in  his  hand. 
The  greatest  minds  go  in  the  greatest  direction.  Rail- 
road building,  industrial  building,  is  the  great  work 
of  today.  And  the  men  who  would  have  been  naval 
heroes  in  the  days  of  Elizabeth,  and  explorers  in  the 
days  of  La  Salle,  and  painters  in  the  days  of  Michael 
Angelo,  are  railroad  men  today.  Such  men  as  Cas- 
satt  and  Harriman  and  Hill  are  all  benefactors  of 
their  country,  and  those  benefactors  are  the  greatest 
and  probably  the  ablest  men  of  today,  not  excepting 
the  newspaper  editors  who  criticise  them. — Arthur 
Brisbane,  at  the  eleventh  annual  dinner  of  the  Traffic 
Club  of  Pittsburgh,  January  13,  1913. 

The  Railroad  Strike  of  1894  at  Chicago 

Virile,  resolute,  full  of  resource, ,  the  railroads  ap- 
pear to  have  appreciated  to  the  full  the  duties  they 
owed  to  the  public,  and  to  have  moved  with  steady 
determination  to  fulfil  them.  Involved  in  a  quarrel 
in  which  they  had  no  more  interest  than  had  any  other 
bystander,  set  on  by  rioters  led  by  a  small  but  reck- 
less squad  of  mutineers  from  their  own  forces,  the 


25 


constituted  authorities  affording  no  bulwark  of  de- 
fense, their  conduct  may  well  be  carefully  examined  as 
affording  evidence  that  the  salt  of  the  earth  hath  not 
lost  Its  savor.  The  country  owes  more  to  the  rail- 
roads than  it  thinks,  for  the  preservation  of  peace  In 
1894.  Whether  we  regard  the  action  of  their  manage- 
ment, dignified  In  the  maintenance  of  their  rights,  dis- 
dainful of  compromise  with  the  wrongdoer,  stead- 
fastly holding  their  course  through  this  troubled  sea; 
or  the  conduct  of  their  men,  moving  In  small  and  Iso- 
lated groups,  quietly  and  indomitably  to  the  perform- 
ance of  their  duties,  amid  the  bowlings  of  the  mob; 
there  stands  revealed  an  Institution  and  a  spirit  that 
may  well  give  heart  to  them  that  love  the  Republic, 
and  that  must  be  reckoned  with  by  them  that  seek  the 
destruction  of  the  established  order. — L.  F.  Loree: 
Emergencies  in  Railroad  Worlc.  Bulletin  of  the  Uni- 
versity of  Wisconsin,  December,  1895. 

Railroads  and  Prosperity 

Railway  transportation  is  one  of  our  largest  indus- 
tries. It  employs  over  a  million  and  a  half  of  men, 
to  whom  have  been  paid  over  a  billion  dollars  in 
wages  in  a  single  year.  The  concerns  that  make  and 
deal  In  railway  equipment  and  supplies,  whose  pros- 
perity depends  on  that  of  the  railways,  employ  per- 
haps as  many  more.  Upon  the  amount  their  em- 
ployers can  pay  these  men  depends  the  amount  they 
can  spend  with  the  local  merchant.  Upon  how  much 
goods  the  local  merchant  can  sell  depends  the  quan- 
tity he  can  buy  from  the  jobber.  Upon  how  much 
the  jobber  can  sell  depends  how  much  he  can  buy 
from  the  manufacturer.  And  upon  how  much  the 
manufacturer  can  sell  depends  how  much  wages  he 
can  pay  and  how  much  raw  materials  he  can  pur- 
chase. Therefore,  the  prosperity  of  the  entire  coun- 


try  depends  to  a  very  large  degree  on  the  prosperity 
of  the  transportation  industry.  I  do  not  take  the 
narrow  view  that  this  is  true  only  of  the  transporta- 
tion industry.  But  how  much  all  classes  will  be  af- 
fected by  the  condition  of  any  industry  depends  on 
how  large  and  important  it  is,  and  how  extensive  are 
its  ramifications;  and  the  prosperity  of  all  depends 
so  much  on  the  condition  of  the  transportation  indus- 
try because  it  is  the  largest,  the  most  important,  and 
the  most  extensive  in  its  ramifications,  except  agri- 
culture.— E.  P.^Ripley:  The  Railroads  and  the  People. 
Atlantic  Monthly,  January,  1911. 

More  Beneficent  than  Philanthropy 

The  benefaction  derived  in  Illinois  and  the  great 
West  from  railroads  is  inestimable,  and  vastly  ex- 
ceeding any  intentional  philanthropy  on  record. — 
Ralph  Waldo  Emerson:  The  Conduct  of  Life. 

Civilization's  Largest  Factor 

The  most  important  business  in  the  world  is  farm- 
ing. 

Food  is  the  primal  need. 

We  get  our  food  out  of  the  soil,  and  the  business 
of  the  farmer  is  to  tickle  the  soil  so  it  will  laugh  a 
harvest. 

The  second  most  important  business  in  the  world 
is  transportation. 

Things  have  no  value  unless  they  are  at  a  certain 
place  at  a  certain  time. 

Food  separated  from  "human  bodies  by  an  impassa- 
ble gulf  is  absolutely  valueless.  % 

I  have  seen  corn  selling  in  Kansas  for  ten  cents  a 
bushel,  wheat  at  twenty-five  cents  a  bushel,  and  hogs 
at  two  cents  a  pound,  simply  because  there  was  no 


available  transportation  for  these  things  from  where 
they  were  plentiful  to  where  they  were  needed. 

The  railroad  cancels  distance  and  annihilates  space. 

Railroads  have  only  one  thing  to  offer,  and  that  is 
transportation. 

The  unit  of  transportation  is  the  mile  haul. 

Railroads  carry  an  adult  human  being  a  mile  for 
two  cents,  and  they  carry  a  ton  of  freight  a  mile  for 
a  cent  or  less. 

To  carry  a  ton  of  freight  on  a  wagon  a  mile,  with 
average  roads,  costs  thirty  cents. 

To  carry  a  man  on  horseback  or  in  a  wagon,  as  was 
done  in  stage-coach  times,  costs  ten  cents. 

The  stage-coach  fare  from  New  York  to  Philadel- 
phia, say  one  hundred  miles,  used  to  be  ten  dollars. 
If  you  walked  the  distance,  as  my  grandfather  did, 
it  took  three  days,  and  the  cost  of  board  and  lodging 
along  the  road  was  no  inconsiderable  figure. 

George  Washington,  in  his  diary,  tells  of  riding 
horseback  from  Philadelphia  to  Boston  in  a  week,  and 
he  thought  he  was  going  some.  Now  the  railroad 
carries  you  in  two  hours  from  New  York  to  Philadel- 
phia, and  the  fare,  say,  is  two  dollars,  and  on  the 
route  you  need  neither  board  nor  lodging. 

The  railroad  is  the  greatest  factor  in  civilization. 
America  holds  her  proud  place  among  the  nations  on 
account  of  her  railroads,  because  by  the  railroad  the 
world's  markets  are  brought  to  the  doors  of  both  pro- 
ducer and  consumer. — Elbert  Hub'bard:  The  Smile 
Habit.  East  Aurora,  New  York,  1912. 

Vital  Force  of  the  Century 

The  railroad  Is  the  expression  of  the  vital  force  of 
the  19th  century.  For  thousands  of  years  the  world 
had  been  plodding  over  beaten  ways,  climbing  moun- 


28 


tains,  toiling  through  valleys,  fording  streams,  when 
suddenly  the  thought  and  study  and  knowledge  of 
many  generations  burst  into  life,  and  Mr.  Stephen- 
son's  little  "Rocket"  astonished  mankind.  The  loco- 
motive threw  open  vast  regions  of  country  until  then 
inaccessible,  and  gave  such  an  impulse  to  civilization, 
commerce,  and  education  as  had  never  before  been 
known.  Our  own  West  long  and  patiently  waited 
for  its  coming  to  bring  life  to  her  desolate  places,  to 
cultivate  her  fertile  prairies,  and  send  forth  her 
produce  to  feed  the  millions. 

Scarcely  a  generation  has  passed  since  the  first 
railroad  was  built,  between  Liverpool  and  Manches- 
ter. It  was  nearly  completed  before  it  was  decided 
by  what  motive  power  the  cars  should  be  propelled. 
A  prize  was  offered  for  the  best  engine  which  could 
move  a  given  weight  ten  miles  an  hour,  and  of  several 
that  were  constructed,  that  of  Mr.  Stephenson  was 
the  only  one  that  could  accomplish  the  task.  In  our 
country  travel  was  then  by  stage  coach,  and  the  mail 
was  generally  carried  on  horseback.  Now,  not  only 
is  nearly  all  travel  by  rail,  and  not  only  is  three- 
fourths  of  the  mail  carried  and  distributed  by  rail- 
road, but  the  supplies  of  our  daily  and  multiplied 
wants,  our  very  food  and  clothing,  our  books  and 
papers,  are  brought  to  us  over  these  iron  roads. — 
Gardiner  G.  Hub'bard:  American  Railroads.  Journal 
of  Political  Science,  1874. 

Railroads  Created  Land  Values 

We  have  some  people  now  who  fear  the  Govern- 
ment has  been  too  liberal  and  has  wasted  its  public 
land;  but  I  can  remember  when  the  Government  prac- 
tically could  not  give  away  lands  that  are  now  worth 
two  hundred  dollars  an  acre.  We  have  given  away  mil- 


lions  of  acres  of  the  public  lands;  but  we  have  by  so 
doing  built  up  an  empire  in  little  more  than  half  a 
century  that  could  not  have  been  developed  in  a  thou- 
sand years  under  the  old  regime. — Joseph  G.  Cannon: 
Followers  After  Strange  Gods.  Saturday  Evening 
Post,  May  3,  1913. 

Public  Opinion  and  the  Railways 

The  railway,  as  a  corporation,  has  no  voice  in  the 
selection  of  those  who  frame  and  administer  the  laws 
for  its  regulation.  Its  physical  property — extending 
in  part  through  sparsely  settled  sections  and  through 
wildernesses,  perhaps — is  the  most  defenseless  prop- 
erty that  exists.  In  the  very  nature  of  its  existence, 
therefore,  it  can  find  safety  only  when,  in  the  darkness 
of  the  night  watches,  in  times  of  stress  and  peril,  and 
in  the  enactment  of  laws  for  its  regulation,  the  in- 
visible sentinel  of  public  opinion  stands  guard  over  its 
rights  and  property.— W.  W.  Finley:  Reply  to  a  toast 
at  the  annual  dinner  of  the  North  Carolina  Society 
of  New  York  City,  at  the  Hotel  Astor,  New  York,  De- 
cember 7,  1908. 


Mileage  and  Capital 


These  tables  were  compiled  for  The  Times  by  the 
American  Bureau  of  Railway  Economics. 

RAILWAY    MILEAGE    OF    THE    UNITED    STATES,    1830-1910. 


Miles  of 

line         Year, 
operated. 


1830. 
1835. 
1840. 
1845. 


23 

1,098 

2,818 

4,633 

1850 9,021 

1855 18,374 

1860 30,635 

1865 35,085 

1870 52,914 

1875 74,096 

1880 93,349 

1885 128,987 

1890..        .  156^404 


Miles  of 

line 
operated. 


189S 177,746 

1900 192,556 

1901 195,562 

1902 200,155 

1903 205,314 

1904 212,243 

1905 216,974 

1906 222,340 

1907 227,455 

1908 230,494 

1909 235,402 

1910 240,831 


31 


RAILWAY    CAPITAL  OF  THE  PRINCIPAL    COUNTRIES   OF  THE 
WORLD. 


Miles 


Capital  outlay 
per  mile 


Country. 

United  States..  . 
Argentina    

repre- 
sented. 

228,841 
14,732 

15,467 
13,917 
12,205 
2,684 
1,050 
32,099 

24,731 
1,218 
24,989 
35,473 
8,699 
4,807 
2,753 
2,177 

41,427 

7,041 
8,242 

2,825 
23,387 
American 

upon  road                Date    of 
and  equip-           information, 
ment. 

$63,631        June  30,  1910 
57,327        Dec.  31,  1908 

46,217        June  30,  1910 
116,690        Dec.  31,  1909 
65,509        Dec.  31,  1908 
190,630        Dec.  31,  1909 
50,008        1906,  Archiv. 
44,402        Dec.  31,1910 

69,939        June  30,  1910 
55,032        1910,  Archiv. 
143,805        Dec.  31,  1909 
109,277         Mar.  31,  1909 
123,801        1907,  Archiv. 
44,852        Mar.  31,  1909 
52,183        Mar.  31,  1910 
33,104        Mar.  31,  1909 

79,298        Dec.  31,1907 

51,907        Dec.  31,  1910 
32,829        Dec.  31,  1908 
115,049        Dec.  31,1908 
274,364        Dec.  31,  1910 
Railway  Number,  June  28, 

Australian  Com- 
monwealth. .  .  . 
Austria  

Hungary  

Belgium  

Brazil   (o)  

British  India  .  .  . 
Canada  (exclud- 
ing Newfound- 
land)   
Denmark  (&)... 
France   

Germany   

Italy  (&)  . 

Japan  

New  Zealand.  .  . 
Norway  

Russia  in  Europe 
(excluding  Fin- 
land)   

South      African 
Union  

Sweden  

Switzerland  .... 
United  Kingdom 
—  London  Times, 
1912. 

Central  Ry.  only. 


State  Railways  only. 


WHO  OWN  THE  RAILROADS? 


The  Common  People 's  Money 

The  general  public  is  each  year  becoming  more  and 
more  interested  financially  in  our  great  railroads.  I 
quote  from  the  Wall  Street  Journal  on  this  subject: 

The  number  of  individual  stockholders  in  conspicu- 
ous incorporations  in  this  country  at  three  different 
periods  is  as  follows : 

1901  1906  1911 

226,956  431,279  864,684 " 

You  will  see  that  in  ten  years  the  number  of  share- 
holders has  increased  more  than  375  per  cent. 

These  individuals  are  more  largely  interested  in 
railroads  than  in  any  other  class  of  incorporations. 
The  Pennsylvania  Railroad  is  owned  by  65,000  stock- 
holders, and  it  is  said  that  more  than  48,000  of  them 
are  women  or  trust  funds  of  decedent  estates.  The 
New  York  Central,  Atchison,  Topeka  &  Santa  Fe,  and 
many  others  are  held  in  a  proportionate  manner.  In- 
stead of  being  owned  and  controlled  by  a  small  band 
of  immensely  rich  Wall  Street  speculators,  the  rail- 
roads are  rapidly  becoming  the  property  of  the  com- 
mon people. 

The  savings  banks,  the  people's  institutions,  in  the 
States  of  Maine,  Massachusetts,  New  Hampshire,  and 
New  York  own  and  control  more  than  a  billion  dollars 
of  the  stock  of  the  leading  railways  and  industrial 
incorporations.  Add  to  this  the  insurance  companies' 
reserves  and  you  get  more  than  a  billion  more,  and  all 

36 


33 


of  this  vast  sum  Is  the. people's  money,  the  common 
people's  money.  The  number  of  people  that  share  in 
the  prosperity  of  the  railroads  is  increasing  by  leaps 
and  bounds. 

The  question  in  the  near  future  will  be  the  relation 
of  the  people  to  their  railroads. 

The  second  class  of  people  who  must  suffer  by  unjust 
persecution  of  the  railroads  is  the  general  public. 
Show  me  the  community  through  which  a  live,  up-to- 
date,  prosperous  railroad  runs  and  I  will  point  to  the 
community  as  a  prosperous  people.  Its  patrons  are 
well  served,  its  employees  are  well  paid,  the  air  of 
prosperity  is  apparent  along  every  mile  of  its  track. 
The  reverse  is  true  along  the  line  of  the  bankrupt  so- 
called  Jerk-water  line. — A.  E.  Reynolds:  Relation  of  tJie 
Railroad  to  the  People.  Address  "before  Transporta- 
tion Cliib  of  Indianapolis,  November  28,  1911. 

Owners  of  the  Pennsylvania 

There  are  some  people  who  believe  the  railroads  are 
owned  by  a  few  millionaires  who  could  afford  to  sacri- 
fice a  portion  of  their  interest  on  bonds  or  dividends 
on  stock  without  feeling  the  effects.  As  a  matter  of 
fact,  there  are  nearly  100,000  persons  interested  as  in- 
vestors in  the  stock  of  the  different  companies  of  the 
Pennsylvania  Railroad  system.  It  is  likely  that 
holders  of  this  company's  bonds  number  200,000.  A 
very  large  percentage  of  these  investors  are  women. 
Enormous  investments  in  American  railroad  securities 
are  held  by  savings  banks,  insurance  companies  and 
trustees  of  estates. 

Strike  at  the  investor  of  railroad  securities  and 
you  hurt  depositors  in  savings  banks,  policy  holders 
in  life  insurance  companies,  women  investors,  and 
many  others  least  able  to  cope  with  the  situation.  The 
capitalist  does  not  submit  to  a  reduction  of  his  divi- 


34 


dends  to  a  point  below  what  he  can  realize  from  some 
other  investment  in  this  country  or  in  some  other  part 
of  the  world.  Capital  is  liquid  and  it  flows  to  where 
it  is  wanted  and  will  be  properly  paid  for. 

If  investments  in  American  railway  securities  are 
to  be  denied  a  proper  return,  those  who  can  do  so  will 
sell  their  holdings  and  the  money  will  be  put  else- 
where, and  when  we  want  more  money  for  improve- 
ments to  handle  the  public  business  we  cannot  get 
it. — Samuel  Rea:  Letter  to  Philadelphia  Ledger,  May 
9,  1913. 

1,000,000  Owners  Representing  4,000,000 
People 

Now,  who  is  the  owner  of  this  enormous  and  com- 
plicated piece  of  machinery  built  up  in  the  last  50 
years?  The  best  figures  obtainable  as  to  the  number 
of  stockholders  show  440,000,  and  while  the  number  of 
bondholders  cannot  be  determined  with  the  same  ac 
curacy,  information  about  a  few  roads  indicates  that 
the  number  of  bondholders  exceeds  the  number  of 
stockholders,  and  that  1,000,000  is  not  an  unfair  figure 
to  represent  those  holding  railway  securities.  Many 
of  these  holders  are  women  and  children,  charitable 
and  educational  institutions,  national  banks,  savings 
banks,  trust  companies,  and  insurance  companies.  The 
average  for  each  owner  of  railway  property  in  this 
country  is  $13,600.  Of  course,  some  individuals  hold 
more  than  this,  and  very  many  hold  much  less,  but  the 
statement  that  railways  are  owned  and  controlled  by  a 
few  very  rich  men  is  not  correct.  These  1,000,000 
owners  represent  at  least  4,000,000  people  in  the  United 
States  whose  daily  bread  and  butter  depends  more  or 
less  on  the  success  or  failure  of  the  railways. — Howard 
Elliott:  Address  at  the  Montana  State  Fair,  Helena, 
Montana,  September  26,  1910. 


Securities  on  Safe  Foundations 

There  has  been  much  wild  talk  as  to  the  extent  of 
the  overcapitalization  of  our  railroads.  The  census 
reports  on  the  commercial  value  of  the  railroads  of 
the  country,  together  with  the  reports  made  to  the 
Interstate  Commerce  Commission  by  the  railroads  on 
their  cost  of  construction,  tend  to  show  that  as  a  whole 
the  railroad  property  of  the  country  is  worth  as  much 
as  the  securities  representing  it,  and  that  in  the  con- 
sensus of  opinion  of  investors  the  total  value  of  stock 
and  bonds  is  greater  than  their  total  face  value,  not- 
withstanding the  "water"  that  has  been  injected  in 
particular  places.  The  huge  value  of  terminals,  the 
immense  expenditures  in  recent  years  in  double-track- 
ing, improving  grades,  road-beds,  and  structures  have 
brought  the  total  investments  to  a  point  where  the 
opinion  that  the  real  value  is  greater  than  the  face 
value  is  probably  true.  No  general  statement  such  as 
this  can  be  accepted  as  having  more  than  a  general 
value ;  there  are  many  exceptions ;  but  the  evidence 
seems  ample  that  the  great  mass  of  our  railroad  securi- 
ties rest  upon  safe  and  solid  foundations;  if  they  fail 
in  any  degree  to  command  complete  public  confidence, 
it  is  because  isolated  instances  of  unconscionable 
stock-watering  and  kindred  offenses  arouse  suspicion, 
which  naturally  extends  to  all  other  corporate  securi- 
ties so  long  as  similar  practices  are  possible  and  the 
tendency  to  resort  to  them  is  unrestrained  by  law. — 
Theodore  Roosevelt  on  Railroad  Investments.  Ameri- 
can Review  of  Reviews,  June,  1907. 

People's  Confidence  Built  the  Railroads 

We  "plead  the  baby  act"  as  a  nation  when  we  cry 
out  against  the  alleged  overcapitalization  of  our  rail- 
road corporations.  The  State  and  the  Nation  had 


their  opportunity,  at  the  time  of  issue,  to  prevent  the 
sale  and  consequent  validation  of  these  "watered" 
securities.  Why  was  their  issue  not  prevented?  Be- 
cause, as  a  people,  we  were  willing  to  pay  the  price 
and  to  take  the  chance  in  order  to  get  the  railroads 
built  and  the  country  developed.  Well,  the  railroads 
were  built  and  the  country  was  developed,  because,  by 
reason  of  this  attitude  of  the  people,  the  States,  and 
the  Nation,  it  was  possible  to  sell  the  securities  thus 
issued  in  the  world's  markets,  and  through  their  sale 
to  obtain  the  money  without  which  the  railroads 
would  not  have  been  built  and  the  country  would  not 
have  been  developed. — Robert  Mather:  Railway  Regu- 
lation. Speech  before  Traffic  Club  of  Pittsburgh, 
April  3,  1908. 

Getting  Closer  to  the  People 

Day  by  day  the  railroads  are  getting  closer  to  the 
homes  and  the  pockets  of  the  people.  It  can  no 
longer  be  asserted  that  five  or  six  capitalists  own  or 
control  the  destinies  of  any  railroad.  They  are  now 
nearly  all  subject  to  the  influence  of  an  army  of  stock- 
holders.— James  O.  Pagan:  The  Industrial  Dilemma. 
II:  The  Railroads  and  Education.  Atlantic  Monthly, 
March,  1909. 

Railroad  Bonds  and  Life  Insurance 

On  January  1,  1910,  there  were  no  less  than  28,087,- 
327  policies  (including  industrial  insurance)  ;  and  the 
insurance  companies  of  the  United  States  had  pledged 
themselves  to  provide  for  beneficiaries  sooner  or  later 
an  aggregate  sum  of  $15,480,721,211 — a  sum  five  times 
as  great  as  the  public  debt  of  this  country  at  its  highest 
point,  at  the  close  of  the  Civil  War,  and  fifteen  times 
the  present  debt  Within  ten  years  (1900-1909)  the 


37 

amount  of  life  insurance  contracted  to  be  paid  has  in- 
creased by  $6,031,601,217  (excluding  industrial  com- 
panies), or  six  times  the  total  of  our  national  debt. 
The  total  current  assets  carried  January  1,  1910,  were 
$3,643,857,971.  This  sum  is  the  ship  which  is  carrying 
the  hopes  of  millions  of  our  people.  Is  that  ship  sea- 
worthy? That  is  the  question  the  people  are  asking — 
and  which  they  have  a  right  to  ask.  And  an  economist 
may  well  give  thought  to  so  grave  a  question.  In  what 
form  are  those  assets  carried,  and  what  are  the  condi- 
tions affecting  their  safety  now  and  in  the  future  in 
this  democracy? 

These  assets,  of  course,  were  placed  in  the  produc- 
tive investments  of  the  country,  and  were  grouped 
roughly  as  follows  (35  companies  doing  business  in 
New  York)  : 

30  per  cent — Real  estate  mortgages $1,084,345,817 

12  per  cent — Premium  notes  and  policy 

loans 446,276,468 

48  per  cent — Bonds  and  stocks  of  all 

kinds 1,761,404,870 

It  thus  appears  that  the  largest  item  is  that  of  bonds 
and  stocks.  This  entry  is  resolvable  into  the  following, 
as  nearly  as  can  be  estimated : 

Railway  bonds  (35  companies) $1,225,576,728 

Corporation  securities 250,000,000 

State,  county  and  municipal  securities.. .       286,000,000 

This  analysis  of  the  kind  of  investments  in  which 
the  people's  insurance  savings  are  placed  may  thus 
enable  us  to  discuss  the  fundamental  issues  in  the 
situation  as  I  find  it  today. — James  Laurence  Laughlln: 
The  People's  Investments  in  Railways.  Address  at  the 
fourth  annual  meeting  of  the  Association  of  Life  In- 
surance Presidents,  at  Chicago,  Illinois,  Saturday,  De- 
cember 10,  1910. 


38 


Bond  Investments 

Railroad  and  other  public-service  corporation  bonds 
appear  to  predominate  in  the  investments  of  all  banks 
except  in  private  and  national  banks.  Mutual  savings 
banks  have  over  one-half  of  their  bond  investments  in 
railroad  and  other  public-service  corporation  bonds,  or 
about  $845,000,000;  loan  and  trust  companies  have 
about  $472,000,000,  or  47  per  cent  of  their  investments, 
in  this  class  of  bonds;  State  banks  have  about  $114,- 
000,000,  or  37  per  cent  of  their  investments,  in  the  same 
class  of  bonds;  stock  savings  banks  have  about  $59,- 
000,000,  of  nearly  one-half  of  their  investments,  in 
this  class  of  securities,  while  private  banks  have  in 
this  class  of  investments  only  about  $1,700,000.  There 
are  only  about  $35,800,000  United  States  bonds  in 
,  banks  other  than  national,  while  $737,600,000  are  held 
by  national  banks.  Of  the  $1,116,200,000  investments 
in  State,  county,  and  municipal  bonds  $714,800,000  are 
in  mutual  savings  banks,  $162,000,000  in  national 
banks,  $144,500,000  in  loan  and  trust  companies,  $63,- 
900,000  in  State  banks,  $28,700,000  in  stock  savings 
banks,  and  $2,300,000  in  private  banks.  Mutual  savings 
banks  hold  $23,500,000  United  States  bonds,  stock  sav- 
ings banks  $8,500,000,  State  banks  $2,100,000,  loan  and 
trust  companies  $1,300,000,  and  private  banks  about 
$400,000. 

Stocks  held  to  the  amount  of  $166,100,000  are  re- 
ported by  loan  and  trust  companies,  $39,400,000  by 
mutual  savings  banks,  $37,600,000  by  national  banks, 
$29,800,000  by  State  banks,  $7,700,000  by  stock  savings 
banks,  $2,800,000  by  private  banks,  or  a  total  holding 
of  $283,400,000.— Report  of  the  Comptroller  of  the  Cur- 
rency,  1910. 


EFFICIENCY  AND  SAFETY. 


American  Roads  First  in  the  World 

It  has  always  been  my  opinion  that  in  actual  econ- 
omy of  operation  the  railways  of  the  United  States 
are  first  in  the  world.  In  the  number  of  tons  per 
car,  cars  per  train;  in  the  fullest  utilization  of  loco- 
motives ;  in  the  obtaining  of  the  greatest  measure  of 
result  for  each  unit  of  expenditure,  they  are  not 
equalled  by  the  railways  of  any  other  nation.  When 
the  Greek  commanders  after  the  battle  of  Salamis 
voted  who  should  receive  the  prize  for  valor  each  put 
his  own  name  first,  but  all  put  the  name  of  Themis- 
tocles  second.  And  Themistocles  received  the  prize. 
80,  too,  though  German,  French,  and  English  railway 
men  would,  I  dare  say,  all  put  their  own  railways 
first  in  efficiency  they  would  all,  I  ani  sure,  put  yours 
second,  and  on  the  voting  of  the  experts  your  railways 
\vould  come  out  first. 

But,  further,  your  nation  as  a  whole  is  not  in  other 
matters  pre-eminently  efficient.  No  one  would  say 
that  your  farmers  were  more  efficient  than  those  of 
France  and  England  or  that  your  Government  is  more 
efficient  than  the  government  of  Prussia.  Your  rail- 
ways have  reached  a  higher  standard  in  .international 
comparison  than  your  farmers  or  your  Government, 
and  under  greater  difficulties,  for  in  England  and  on 
the  Continent  employment  with  a  railway  company 
is  a  prize  and  man  hopes  to  remain  in  the  service  of 
the  same  company  throughout  his  life.  He  is,  there- 
fore, obviously  more  amenable  to  discipline  than  the 

39 


40 


shifting  and  often  even  foreign  force  employed  on 
your  railways. — W.  M.  Acworth,  said  by  President 
Hadley  to  be  "the  highest  authority  on  the  railways 
of  Great  Britain:' 

Practicable  Efficiency 

Efficiency  from  the  standpoint  of  the  railway  may 
consist  in  loading  cars  and  trains  to  their  capacity 
and  moving  only  the  minimum  number  of  cars  and 
trains  necessary  to  handle  the  business.  Efficiency 
from  the  manager's  standpoint  may  involve  a  rela- 
tively slow  movement  of  trains,  because  the  faster 
engines  are  driven  the  greater  the  amount  of  fuel 
they  consume  and  the  smaller  the  load  they  can  pull, 
the  result  being  that  the  cost  of  running  the  train  is 
increased  while  the  revenue  derived  from  running  it 
is  reduced.  On  the  other  hand,  as  I  have  said, 
speedy,  frequent,  and  regular  service  Is  a  very  im- 
portant factor  in  efficiency  from  the  standpoint  of  the 
public.  Now,  when  the  public  insists  on  a  kind  of 
transportation  which  is  incompatible  with  the  most 
economical  operation  no  one  can  justly  criticise  the 
railway  managers  for  complying  with  the  public's 
demands  and  for  that  reason  failing  to  operate  the 
properties  with  the  maximum  possible  economy.  If 
the  railway  managers  operate  the  properties,  not  with 
the  maximum  economy  that  might  be  possible  under 
certain  conceivable  conditions,  but  with  the  maximum 
economy  that  is  practicable  under  the  actual  condi- 
tions with  which  thev  have  to  deal,  they  do  all  that 
thev  reasonably  can  be  asked  to  do.  I  think  that  the 
railway  managers  of  the  United  States  are  approxi- 
mately much  closer  to  the  maximum  practicable  effi- 
ciency and  economy  of  operation  than  most  people 
believe. — Julius  Eruttschnitt,  before  the  Graduate 


41 

School  of  Business  Administration,  Harvard  Univer- 
sity, Cambridge,  Massachusetts,  April  26,  1911. 

Railroads  Lead  in  Efficiency 

As  they  stand  today,  I  believe  that  the  railways, 
with  all  their  faults,  exhibit  the  highest  industrial 
efficiency  attained  in  this  country.  The  regularity 
and  punctuality  necessary  in  the  performance  of  a 
railroad  man's  duty,  the  seriousness  entailed  by  the 
safeguarding  of  lives  and  of  property,  elicit  respect 
for  the  railroad  man's  calling.  This  regularity  and 
punctuality  have  been  said  to  enhance  the  develop- 
ment of  those  qualities  in  the  population  in  general 
of  a  railroad  town.  That  station  men  and  trainmen 
average  at  least  as  high  as  their  fellow-citizens  in 
forbearance  and  self-control  I  think  is  beyond  ques- 
tion. Is  it  the  statement  of  an  impossible  ideal  to 
hope  that  they  may  develop  these  qualities  to  a  stand- 
ard admittedly  far  above  the  average?  The  term 
"railroad  man"  is  a  worthy  designation  now.  Can 
it  not  be  made  so  to  stand  for  the  manly  virtues  that 
it  may  be  honored  through  coming  years  as  we  now 
honor  the  Knights  of  the  Round  Table  and  the  Sam- 
urai of  Old  Japan? — L.  O.  McPherson:  Address  before 
annual  meeting  of  station  agents  of  the  Delaware  d 
Hudson  Railroad  Company,  Bluff  Point;  September 
21-23,  1911. 

High  Efficiency  Needed 

Next  to  agriculture  our  railroads  are  the  greatest 
single  industry.  In  their  ordinary  maintenance  and 
operation  great  numbers  of  laborers  and  vast  quan- 
tities of  supplies  are  used.  Railroad  extension  would 
mean  the  employment  of  additional  laborers  and  the 


42 


purchase  of  additional  material  and  equipment. 
Now,  the  thought  seems  to  be  that  to  permit  these 
advances  would  induce  larger  expenditures  in  the 
maintenance  of  our  present  roads,  and  would  lead  to 
extensions  and  improvements  which  would  in  turn 
employ  additional  labor,  put  into  circulation  addi- 
tional money,  and  thereby  improve  general  business 
conditions. 

So  far  as  such  expenditures  are  legitimate,  they 
ought  to  be  encouraged.  Our  railroads  should  be 
kept  in  a  high  state  of  efficiency,  and  railroad  charges 
should  be  sufficient  to  permit  this.  Necessary  exten- 
sions and  improvements  should  be  made,  and  the 
treatment  of  our  railroads  by  the  public  should  be 
such  as  will  inspire  that  confidence  in  the  investing 
public  necessary  to  obtain  the  funds  for  such  addi- 
tions.— Evidence  taken  by  Interstate  Commerce  Com- 
mission in  the  matter  of  proposed  advances  in  freight 
rates  by  carriers,  August  to  December,  1910,  v.  10: 
5445. 

A  Labor  Leader  on  Efficiency 

Recently  the  papers  were  filled  with  the  statements 
made  by  a  new  star  that  had  risen  in  the  labor  world. 
"The  railroads  can  save  a  million  dollars  a  day ;"  think 
of  it!  363  millions  a  year.  When  a  man  comes  for- 
ward with  such  a  startling  statement  as  that  made 
by  Mr.  Brandeis,  we  commence  to  look  around  and 
ask  questions  we  have  a  right  to  ask.  Did  he  ever 
manage  a  railroad?  No;  he  never  did.  Place  him  in 
the  general  manager's  chair  in  charge  of  one  of  these 
great  railway  systems  and  he  would  be  lost.  You 
would  have  to  put  a  bell  on  him  to  find  him.  Did  he 
ever  design  a  locomotive  or  draft  one?  No;  he  never 
did.  I  have.  I  have  shoveled  more  coal  into  locomo- 


43 


tives  than  you  could  pile  on  a  city  block.  Mr.  Bran- 
deis  has  had  no  practical  experience,  and  knows  noth- 
ing about  the  subject.  Yet  only  yesterday  he  stated 
we  could  save  $500,000  a  day  on  fuel  alone.  No  rail- 
road at  the  present  time  is  throwing  away  a  dollar, 
and,  regardless  of  Mr.  Brandeis'  statements  to  the 
contrary,  the  American  railroads  are  the  best  man- 
aged in  the  world.  The  men  in  charge  of  these  great 
systems  stand  head  and  shoulders  above  the  railroad 
men  of  the  world.  There  is  no  other  class  of  business 
that  is  operated  on  so  close  a  margin ;  no  other  busi- 
ness where  the  details  are  watched  so  closely  as  on 
the  average  railroad.  And  yet  Mr.  Brandeis  says  they 
can  save  365  millions  a  year.  He  must  have  got  this 
fairy-tale  out  of  some  story-book.  But  who  is  Mr. 
Brandeis?  Who's  Who  in  America  states  that  he  is 
a  very  able,  highly  accomplished  attorney  of  Boston. 
A  short  time  ago  the  daily  press  announced  that  he, 
having  acquired  enough  of  this  world's  goods,  would 
devote  his  future  time  and  ability  in  philanthropic 
work,  would  give  his  talents  and  service,,  free  of 
charge,  to  help  the  down-trodden  and  oppressed.  Next 
thing  we  heard  he  was  in  Washington  filing  a  brief  in 
behalf  o£  the  Shippers'  Association,  protesting  against 
an  increase  in  freight  rates ;  perhaps  he  thought  they 
were  the  oppressed.  Before  any  association  or  indi- 
vidual brings  a  case  before  the  bar  of  public  opinion 
and  expects  their  support  they  should  at  least  come 
with  clean  hands.  The  individual  shippers  of  the 
country  are  the  very  ones  who  reap  the  benefits  of 
all  rebates  ever  given  and  cause  the  present  drastic 
laws  for  the  regulation  of  interstate  traffic  to  be 
enacted. 

In  the  end  who  pays  the  freight?  The  most  super- 
ficial study  of  the  question  will  prove  to  any  one  that 
the  consumer  pays  the  freight.  The  shipper  does  not 


44 


pay  a  dollar  of  the  freight;  he  is  simply  a  parasite 
who  lives  off  the  consumer  and  the  producer,  one  of 
the  middlemen  who  take  their  toll  and  increase  the 
cost  of  living. — Warren  S.  Stone:  Efficiency  as  the 
Employe*  Sees  It.  11£7&  annual  meeting  National  Civic 
Federation,  1911. 

The  Pick  of  All  Industry 

In  something  less  than  three  generations  there  has 
been  built  up  in  the  railroad  service  of  this  country 
a  practice  and  a  personnel  that  for  efficiency  and  char- 
acter stands  without  parallel  in  the  world.  Men  en- 
tering the  service  are  subjected  at  the  outset  to  a 
careful  physical  examination ;  they  receive  systematic 
instruction,  and  are  held  to  a  high  state  of  discipline. 
In  the  main,  they  are  subject  to  be  called  upon  for 
duty  at  all  hours  of  the  day  and  on  all  days  of  the 
year.  They  are  under  control  not  only  as  to  the  dis- 
position of  their  time,  but  as  to  their  personal  habits. 
They  are  engaged  in  a  hazardous  occupation.  Having 
in  mind  the  character  of  the  force  so  assembled,  the 
restrictions  imposed  and  the  service  rendered,  it  is  of 
the  highest  importance  that  relatively  the  rate  of 
wages  paid  and  the  conditions  of  employment  should 
be  such  as  to  attract  and  retain  in  this  service  the 
pick  of  the  industrial  community. — L.  F.  Loree:  Ad- 
dress at  the  annual  dinner  of  the  Alumni  Association 
of  Rutgers  College,  June,  1908. 

A  Premium  of  Efficiency 

The  complexity  of  the  problem  of  determining 
whether  the  railroads  are  able  or  unable  to  devote  an 
increasing  share  of  their  income  to  higher  wages  for 
their  employes  is  illustrated  by  the  question:  What 


rate  of  return  should  be  allowed  on  capital?  It 
seems  plain  that  no  fixed  percentage  can  be  named.  If 
this  were  done,  there  would  be  no  strong  incentive, 
when  a  road  once  reached  the  degree  of  efficiency 
requisite  to  give  this  percentage  of  interest,  to  a  fur- 
ther increase  of  efficiency  and  economy.  But  compe- 
tition in  this  respect  should  not  be  eliminated,  and  if 
it  is  to  be  encouraged  great  care  will  have  to  be  taken 
not  to  limit  too  closely  the  dividends  on  the  stocks  of 
roads  which  are  managed  with  exceptional  efficiency. 
Commissioner  Lane  in  the  Western  rate-advance  case, 
decided  February  22,  1911,  gave  it  as  his  opinion  that 
"some  method  must  be  found  under  which  a  carrier 
by  its  own  efficiency  of  management  shall  profit.  A 
premium  must  be  put  upon  efficiency  in  the  operation 
of  the  American  railroad.  *  *  *  Society  should  not 
take  from  the  wisely-managed  railroad  the  benefits 
which  flow  from  the  foresight,  skill,  and  planned  co- 
operation of  its  working  force." — Commission  in  Arbi- 
tration between  the  Eastern  Railroads  and  the  Broth- 
erhood of  Locomotive  Engineers,  Charles  R.  Van  Hise, 
chairman;  Oscar  8,  Straus,  F.  N.  Judson,  Otto  M. 
Eidlitz,  Albert  Shaw,  D.  Willard,  1912. 

Tonic  Effect  of  Good  Service 

This  intensive  growth  of  a  railroad  system  is  the 
most  powerful  stimulus  possible  to  a  manufacturing 
country.  I  think  that  a  purely  agricultural  com- 
munity needs  rather  new  mileage,  no  matter  how 
poor.  The  farmer,  whose  freight  is  mostly  grain, 
does  not  care  particularly  whether  it  goes  out  today 
or  next  week.  He  sells  it  on  contract  any  way,  and 
it  will  move  only  to  the  elevators,  and  go  to  the  final 
market  long  after  it  has  been  gathered  in  from  the 
fields  and  local  markets.  He  may  fret  a  little  over 


46 


the  fact  that  he  has  to  order  his  new  machinery  and 
seed  months  earlier  than  his  cousin  in  the  next  State, 
who  lives  on  a  better  railroad;  but  it  will  not  make 
any  material  difference  in  his  bank  account. 

The  manufacturer,  on  the  other  hand,  must  have 
good  service.  The  jobbers  in  New  York,  Chicago,  St. 
Txmis,  Philadelphia,  or  Cincinnati,  who  buy  his  goods, 
or  who  sell  them  on  commission,  keep  a  record  of  the 
length  of  time  that  he  takes  to  make  deliveries.  Two 
men,  both  manufacturing  the  same  grade  of  furni- 
ture, are  located  at  an  equal  distance  from  New 
York.  Both  get  orders  on  the  same  day,  from  the 
same  jobber,  for  a  similar  amount  of  similar  goods, 
known  to  be  ready  for  shipment  in  their  sheds.  The 
first  has  a  poor  railroad  service.  He  makes  his  de- 
livery of  the  goods  in  twenty-two  days.  The  other, 
with  a  good  service,  makes  delivery  in  fifteen  days. 
The  ultimate  result  is  obvious.  The  factory  on  the 
better  railroad  will  outstrip  its  rival  in  the  New  York 
1  trade,  other  things  being  equal. 

And  the  town  on  the  better  railroad  will  outstrip 
the  similar  town  on  the  poorer  railroad.  All  indus- 
tries will  flourish  better  in  the  town  with  the  better 
service.  The  plants  will  add  hundreds  of  men  to 
their  staffs,  while  the  plants  in  the  other  town  will 
add  dozens.  Capital  will  follow  where  the  greatest 
successes,  have  been  won.  The  man  with  a  fund  to 
put  into  business  studies  very  carefully  the  records 
of  men  already  in  business.  He  searches  for  ultimate 
causes.  In  a  great  many  cases  he  finds  the  ultimate 
cause  in  the  difference  between  poor  railroad  service 
and  good  railroad  service. — O.  M.  Keys:  An  Era  of 
Better  Railroads.  World's  Work,  February,  1909. 


Modern  Freight  Cars 

Contrasted  with  what  may  be  called  the  extrava- 
gance of  the  passenger  service,  the  modern  freight 
car,  as  we  have  seen,  carries  two-and-a-half  times  its 
own  weight,  and  a  train  of  the  largest  freight  cars 
will  transport  to  the  seaboard  the  product  of  5,000 
acres  of  wheat  fields.  The  mammoth  steel  cars  which 
are  seen  in  long  trains  in  the  vicinity  of  the  coal 
mines  are  little  less  imposing  than  an  array  of  bat- 
tleships, which  name  the  trainmen  have  aptly  applied 
to  them.  And  the  economy  accomplished  by  enlarg- 
ing the  cars  is  no  less  striking  than  that  due  to  the 
increase  in  the  sizes  of  the  locomotives.  Where  the 
Mallet  compounds  are  used,  one  engine  moves  a  train 
twice  as  long  as  the  usual  train  hauled  by  locomo- 
tives of  the  former  standard,  and  the  number  of 
trains  is  correspondingly  reduced,  with  a  great  sav- 
ing in  the  wages  of  conductors  and  brakemen.  On 
one  division  of  the  New  York  Central,  where  the 
traffic  consists  largely  of  coal,  all  of  the  60  consoli- 
dation locomotives  formerly  used  to  move  the  freight 
trains  have  been  transferred  to  other  divisions  and 
26  Mallet  compounds,  less  than  half  the  number  of 
engines  formerly  employed,  now  handle  the  whole  of 
the  trains  and  do  it  at  much  better  average  speeds. 
The  consumption  of  fuel  per  mile  is  35  per  cent  less 
than  with  the  old  engines. — London  Times,  American 
Railway  Number,  June  28,  1912. 

Growth  of  the  Passenger  Car 

The  same  growth  has  characterized  the  American 
passenger  car.  From  a  length  of  between  40  ft.  and 
50  ft.  it  has  increased  to  75  ft.  and  80  ft,  and  with 
the  increase  in  length  has  come  a  more  than  corre- 


48 


spending  increase  of  weight.  The  seating  capacity 
of  an  ordinary  day  coach  70  ft.  long  is  about  88  pas- 
sengers, and  its  weight  is  about  135,000  Ibs.  If  the 
passengers  are  averaged  at  140  Ibs.  each,  this  gives  a 
dead  load  of  about  11  Ibs.  for  each  pound  of  passen- 
ger.— London  Times,  American  Railway  Number,  June 
28,  1912. 

Units  of  Railway  Performance 

The  pressure  for  lower  rates,  the  steady  increase 
in  taxes  of  all  kinds,  the  rapidly  increasing  wages, 
and  the  mounting  prices  for  all  material  used  by  the 
railroads  forced  great  economies  in  methods  of  oper- 
ation. These  were  made  possible  largely  by  the  pow- 
erful locomotives  and  the  capacious  freight  cars.  The 
traffic  units  carried  per  dollar  of  capitalization,  which 
had  increased  38  per  cent  from  1885  to  1895,  in- 
creased 91  per  cent  from  1895  to  1905.  The  number 
of  traffic  units  carried  per  mile  of  track  increased  13 
per  cent  from  1885  to  1895  and  66  per  cent  from  1895 
to  1905.  The  number  of  traffic  units  carried  per  loco- 
motive increased  21  per  cent  from  1885  to  1895  and 
59  per  cent  from  1895  to  1905.  The  number  of  traffic 
units  carried  per  employee  increased  22.59  per  cent 
from  1895  to  1905.  This  greater  performance  per 
unit  of  plant  is  also  reflected  in  the  ratio  of  the  capi- 
talization to  the  earnings.  In  1885  it  took  $10.15  of 
capitalization  to  produce  one  dollar  of  gross  earn- 
ings; in  1895,  $8.84;  in  1905,  but  $5.36.  The  capital- 
ization per  unit  of  traffic  was  13.4  cents  in  1885,  9.7 
cents  in  1895,  and  but  5.3  cents  in  1905.  This  result 
was  attained,  notwithstanding  that  the  average  rate 
per  ton  per  mile  in  twenty  years  had  decreased  27.5 
per  cent. — L.  G.  McPlierson:  The  Needs  of  the  Rail- 
roads. Political  Science  Quarterly,  September,  1908. 


More  Burdens  on  the  Railways 

The  public  should  know  exactly  what  is  meant  by 
the  proposal  to  increase  freight  rates  5  per  cent.  The 
annual  revenue  from  freight  in  the  territory  concerned 
is  about  $800,000,000.  Five  per  cent  on  this  is  $40,- 
000,000.  There  are  about  40,000,000  people  in  this  por- 
tion of  the  country.  The  proposed  increase  therefore 
means  an  average  of  $1  per  year  per  head  of  popula- 
tion— eight  cents  a  month. 

Everybody  knows  that  the  railroads  have  been  put 
to  greatly  increased  expense  in  recent  years.  On  the 
Pennsylvania  Railroad  System  lines  east  of  Pittsburgh 
the  added  cost  of  new  legislation  from  August,  1906, 
to  December,  1912,  was  nearly  $11,000,000.  Question 
is  not  here  raised  as  to  the  propriety  of  the  legisla- 
tion; the  fact  is  that  it  has  cost  $11,000,000  in  six 
years  to  comply  with  it 

Recently  many  more  laws  have  been  enacted.  These 
will  cost  still  more.  The  New  Jersey  grade-crossing 
bill  alone  involves  an  ultimate  cost  to  this  company's 
system  of  more  than  $60,000,000,  for  that  law  imposes 
upon  the  railroad  companies  the  entire  burden  of  the 
cost  of  removing  all  grade  crossings.  Extra-crew 
laws,  drinking-water  laws,  railroad-valuation  laws,  all 
are  adding  to  the  cost  of  running  a  railroad. 

Now  managements  of  railroads  seek  to  obey  the 
law.  If  the  public,  through  constituted  authority,  de- 
mands certain  measures  of  safety,  certain  improve- 
ments, certain  conveniences,  it  is  entirely  within  the 
right  of  this  public  to  express  that  demand  in  the  form 
of  law.  But  certainly  such  measures  of  safety  and 
comfort  must  be  paid  for  by  somebody.  The  rail- 
roads are  only  too  happy  to  remove  all  grade  cross- 
ings, to  equip  every  mile  of  track  with  automatic 
block  signals,  to  make  everv  car  of  all-steel  construe- 


50 


tion,  but  to  do  these  things  is  utterly  impossible  with- 
out the  money  with  which  to  pay  for  them. — Samuel 
Rea:  Letter  to  Philadelphia  Ledger,  May  9,  1913. 

Economy  of  Operation 

On  the  occasion  of  the  last  rate  controversy  an 
attorney  from  Boston  said,  in  arguing  the  case  of  his 
clients,  that  the  roads  of  this  country  could  save  al- 
most one  million  dollars  each  day  by  applying  the 
"science  of  management"  to  their  operation.  It  seems 
unfortunate  to  his  cause  that  the  gentleman  omitted 
domestic  and  Christian  Science,  for  they  are  about 
equally  applicable  to  railroad  operation  and  are  more 
clearly  understood  by  the  general  public.  However, 
it  is  no  doubt  true  that  that  statement,  coming  as  it 
did  at  the  psychological  moment,  artfully  diverted 
public  attention  from  the  question  of  rates  to  the 
possibilities  of  a  vague  theory.  That  was  its  effect, 
at  least.  While  the  gentleman  from  Boston  was  no 
doubt  sincere  in  his  opinion,  we  must  not  forget  that 
he  was  inexperienced  and  incompetent,  as  we  know 
him,  in  practical  railroad  operation,  and  not  there- 
fore competent  to  pass  judgment  on  the  thing  of 
which  he  spoke. 

Compare  his  statement  with  the  opinion  of  W.  M. 
Acworth,  an  accepted  English  authority  on  railroads, 
as  expressed  in  an  interview  in  the  New  York  Even- 
ing Sun  prior  to  his  departure  for  his  home  in  Eng- 
land in  February  last,  in  which  he  said: 

"It  has  always  been  my  opinion  that  in  actual 
economy  of  operation  the  railroads  of  the  United 
States  are  first  in  the  world." 

Compare  the  Boston  gentleman's  opinion  also  with 
that  of  the  Hon.  Franklin  K.  Lane,  of  the  Interstate 
Commerce  Commission,  as  published  in  the  Chicago 


51 


Evening  Post,  September  7,  1910,  following  his  return 
from  the  International  Railway  Congress  at  Berne, 
Switzerland,  where  he  represented  the  United  States, 
in  which  Mr.  Lane  is  quoted  as  saying: 

"The  conference  established  beyond  question,  I 
think,  the  supremacy  of  the  American  railroads  from 
the  standpoint  of  efficiency." — Charles  D.  Trueman: 
Railroads  and  the  Citizen;  Their  Relation.  From  the 
Railway  World,  October  6,  1911. 

Capitalization  and  Service 

The  suggestion  that  a  superabundant  issue  of  capi- 
tal securities  would  lead  to  higher  charges  for  rail- 
way services  might  seem  to  be  of  more  practical  Im- 
portance if  there  were  any  real  and  general  over- 
capitalization of  American  railway  property.  But, 
as  has  been  proven  over  and  over  again,  the  contrary 
is  the  fact — on  the  whole,  the  value  of  the  railway 
system  of  the  country  is  actually  and  greatly  In  ex- 
cess of  the  par  value  of  all  the  securities  outstand- 
ing. Examining  the  suggestion  as  it  stands,  however, 
it  plainly  involves  the  assertion  that  charges  can  be 
advanced  at  will  and  that  the  desire  to  earn  a  return 
upon  all  outstanding  securities  is  a  sufficient  Incen- 
tive to  such  advances.  But  between  the  desire  for 
more  revenue  and  its  satisfaction  by  means  of  ad- 
vancing rates  to  unreasonable  figures  or  the  substi- 
tution of  Inferior  service  stands  (first),  the  regula- 
tive power  and  established  agencies  of  the  Federal 
and  State  governments,  and  (second)  the  fact  that 
the  commodities  moved  must  be  sold  in  competitive 
markets,  where  they  meet  the  same  and  substitutable 
articles  produced  locally  and  brought  from  other 
sources  of  supply,  and  that,  in  consequence,  exorbi- 
tant rates  or  inferior  service  will  invariably  produce 


52 


less,  and  not  more,  net  income. — W.  H.  William*: 
Letter  to  Railroad  Securities  Commission,  January 
18,  1911. 

Value  of  Large  Systems 

In  addition  to  the  benefits  pointed  out  as  conse- 
quences of  consolidation  in  industrial  growth,  espe- 
cially as  affecting  the  workingman,  many  others  hare 
accrued  to  the  public  by  reason  of  the  grouping  of 
railroads  into  large  systems.  In  Europe,  where  the 
population  is  dense,  this  fact  has  long  been  recog- 
nized, and  the  paralleling  %f  a  railroad  Is  forbidden 
by  law.  Good  service  can  be  given  only  by  a  road 
that  is  making  money.  The  people  are  the  chief  suf- 
ferers wherever  a  railroad  is  operated  at  a  loss. 
Formerly  every  small  railroad  that  began  nowhere 
and  ended  at  the  crossroads  had  its  president,  vice- 
president,  and  full  complement  of  other  officers,  all 
drawing  good  salaries.  For  these  there  is  now  one 
series  of  officers  and  one  set  of  salaries.  Economy 
has  marked  every  stage  of  the  welding  of  these  little 
railroads  together;  but  all  other  gains  are  insignifi- 
cant when  compared  with  the  enormous  increase  of 
efficiency  in  operation  and  the  decrease  in  cost  to  the 
public. — James  J.  Hill:  Highways  of  Progress. 

The  Experience  of  1907 

If  you  increase  the  size  of  a  bottle  without  enlarg- 
ing the  neck,  more  time  and  more  work  are  required 
to  fill  and  empty  it.  That  is  what  has  happened  to 
the  transportation  business.  In  1907  traffic  was 
blocked  on  nearly  all  the  principal  Eastern  railway 
lines.  It  took  months  to  convey  an  ordinary  ship- 
ment of  goods  from  one  domestic  market  to  another. 


53 


The  deadlock  was  broken  partly  by  a  panic  that 
lessened  the  volume  of  business  and  partly  by  the 
efforts  of  railway  managements  to  add,  by  increased 
efficiency,  to  the  moving  power  of  facilities  at  com- 
mand. We  neither  anticipate  nor  desire  perpetual 
business  depression.  WhAe  the  limits  of  efficiency 
have  not  been  reached,  we  know  that  it  cannot  be 
made  to  cover  the  demands  of  our  growth  in  popula- 
tion and  production.  The  records  of  any  large  city 
will  prove  this.  The  tonnage  of  the  Pittsburgh  Dis- 
trict, for  example,  by  railroad  alone,  grew  from  64,- 
125,000  to  152,000,000  in  the  ten  years  between  1901 
and  1911.  It  is  both  practical  #nd  patriotic  to  ask, 
What  is  to  be  done? — James  J.  Hill:  The  Country' 9 
Need  of  Greater  Railway  Facilities  and  Terminal*. 
Address  at  annual  dinner  of  Railway  Business  Asso- 
ciation, New  YorJc,  December  19,  1912. 

Value  of  Statistics 

One  of  the  subjects  which  had  exercised  my  mind 
a  good  deal  before  I  went  to  America  was  how  the 
large  undertakings  now  operated  under  one  organi- 
zation were  managed  and  controlled,  since  personal 
supervision  by  the  higher  officers  was  no  longer  prac- 
ticable. I  asked  the  question  of  several  presidents, 
vice-presidents,  heads  of  departments,  and  district 
officers  whom  1  met.  Without  exception  they  gave 
me  the  answer  that  the  control  was  exercised  through 
statistics.  Equally  without  exception  they  said  they 
could  not  possibly  conduct  their  business  efficiently 
without  statistics;  that  without  them  they  were 
working  in  the  dark;  and  that  they  could  not  under- 
stand how  any  railroad  could  be  efficiently  and  eco- 
nomically operated  without  statistics.  The  president 
of  the  railroad  which  has  made  the  most  scientific 


54 


study  of  the  subject  told  me  that  at  one  time  his 
railway  kept  only  the  most  meager  statistics.  Be- 
yond knowing  in  a  general  way  that  he  ran  so  many 
train  miles  and  carried  so  many  passengers  and  so 
many  tons  of  goods,  and  that  he  earned  so  much  reve- 
nue and  expended  so  much*  money  in  the  service,  he 
had  no  information.  He  had  no  means  of  knowing 
what  the  income  from  any  particular  service  was,  nor 
had  he  then  any  idea  of  the  cost  of  providing  It.  He 
had.no  standards  of  any  kind  to  guide  him.  He  felt 
this  was  not  right,  and  that  if  he  was  to  operate  his 
railway  economically  and  with  profit,  he  must  know 
exactly  where  the  money  went,  and  what  income  was 
being  received  for  a  particula^  jenditure.  He  ac- 
cordingly proceeded  to  devise  some  form  of  statis- 
tics which  would  give  him  the  necessary  information, 
and,  after  many  trials  and  errors,  he  arrived  at  his 
present  system.  *  *  *  I  was  assured  that  both 
he  and  his  officers  were  quite  satisfied  that  the  money 
was  more  than  well  spent,  and  that  by  means  of 
these  statistics  they  had  been  enabled  to  introduce 
reforms  and  economies  the  necessity  for  which  would 
otherwise  never  have  been  known,  and  that  gen- 
erally the  outlay  which  they  incurred  in  the  compila- 
tion of  the  statistics  represented  only  a  very  small 
percentage  of  the  saving  effected  by  their  aid.  *  *  * 
Of  course  every  one  recognizes  that  experience  and 
reflection  are  necessary  for  the  intelligent  application 
of  all  statistics,  and  that  statistics  used  without  in- 
telligence may  be  not  only  of  no  value,  but  very 
harmful.  But  it  is  contended  that,  when  used  with 
intelligence,  they  help  to  impress  all  with  the  money 
value  of  the  service  performed  and  to  bring  sharply 
to  their  attention  the  cost  of  inefficient  service,  help- 
ing thereby  to  cut  out  a  proportion  of  the  numerous 
things  that  militate  against  an  economical  perform- 


ance— 'Neville  Priestly,  Under  Secretary  for  India, 
appointed  by  the  British  Government  to  make  an  in- 
vestigation of  the  methods  of  American  Railways. 

The  System  of  Statistics 

The  early  railroads  were  rarely  more  than  one  or 
two  hundred  miles  long.  The  officer  responsible  for 
maintenance  and  operation  was  personally  familiar 
with  every  mile  of  the  track,  the  characteristics  of 
every  locomotive,  and  of  almost  every  employee  on  the 
pay  roll.  By  continual  travel  over  the  road  and  in- 
cessant personal  supervision  this  officer,  the  man  im- 
mediately responsible  to  the  owners  of  the  road,  could 
immediately  direct  the  application  of  material  and  the 
performance  of  the  employees.  As  many  of  the  roads 
were  extended  and  as  there  was  amalgamation  of  the 
smaller  roads,  this  minute  direction  of  the  one  re- 
sponsible officer  passed  beyond  the  limits  of  any  one 
man's  capacity.  Certain  measures  of  authority  had 
to  be  delegated  to  others,  the  operations  not  often 
being  so  extensive  as  to  baffle  the  personal  inspection 
of  the  responsible  manager.  As,  however,  the  larger 
railways  have  been  extended  over  thousands  of  miles 
and  there  has  been  amalgamation  of  large  roads  into 
systems,  each  penetrating  many  States,  traversing 
both  lowlands  and  mountains,  with  traffic  increasing 
in  density  and  variety,  there  has  arisen  that  compli- 
cated organization  the  results  of  whose  co-ordinated 
performance  are  absolutely  beyond  unaided  physical 
perception.  By  way  of  exhibiting  the  results  of  the 
details  of  different  phases  of  operation,  of  comparing 
the  performance  of  one  division  with  that  of  another, 
the  accounting  department  began  to  collect  and  record 
figures,  not  simply  with  a  view  of  making  bookkeep- 
ing debits  and  credits,  but  with  a  view  to  aid  in  the 


56 

scrutiny  of  any  detail  of  performance,  by  placing  In 
comparison  the  results  obtained  here  with  the  results 
obtained  there,  the  results  obtained  at  one  period 
with  those  obtained  during  another  and  corresponding 
period,  thereby  enabling  analysis  of  the  causes  pro- 
ducing variations,  the  elimination  of  idiosyncrasies 
and  inefficient  practice,  and  the  intelligent  outline  of 
a  policy  for  the  future.  This  practice  has  developed 
into  a  system  of  statistics  which  by  universal  consent 
has  been  a  foremost  factor  in  contributing  to  the  effi- 
ciency of  the  American  railroads. — L.  G.  McPherson: 
The  Working  of  the  Railroads. 

Eleven  Thousand  a  Year 

Nobody  was  ever  struck  by  a  railway  engine  except 
upon  a  railway  track,  or,  at  any  rate,  so  near  to  it 
that  he  was  poaching  on  its  preserve.  Between  the 
rails  of  a  railroad  there  are,  ordinarily,  just  four 
feet  eight  inches  and  a  half,  and  the  balance  of  the 
unsafe  space  does  not  exceed  three  feet ;  yet  with  all 
the  rest  of  the  world  to  stand  and  walk  on,  some 
eleven  thousand  people  every  year  find  it  necessary 
to  their  employment  to  end  their  days,  or  their  health, 
on  this  narrow  strip  of  land.  It  is  not,  as  I  before 
intimated,  that  I  am  so  much  worried  about  these 
curious  people  as  I  am  annoyed  that  they  should  be 
the  means  of  giving  my  friend  such  a  bad  reputation. 
It  is  rather  to  protect  his  reputation  against  their 
assaults  that  I  would  make  it,  as  near  as  possible, 
impossible  for  them  to  get  within  a  destructive  dis- 
tance of  him. — George  A.  Rankin:  An  American  Trans- 
portation System. 


57 


Accidents  to  Trespassers 

Fourteen  people  were  killed  yesterday  while  tre»- 
passing;  fourteen  will  be  killed  today;  fourteen  will 
be  killed  tomorrow — if  the  record  of  recent  years  is 
being  and  shall  be  maintained.  It  is  not  often  that 
as  many  as  fourteen  passengers  are  killed  in  a  wreck ; 
but  every  bad  wreck  causes  numerous  investigations 
and  reports,  often  resulting  in  orders  by  commissions 
or  legislation.  The  greatest  number  of  passengers 
ever  killed  in  a  single  year  from  all  causes  was  in 
1907,  when  they  numbered  610,  and  even  in  that  year 
the  number  of  trespassers  killed — 5,612 — was  over 
nine  times  as  great  as  the  number  of  passengers 
killed.  In  1911,  the  last  year  for  which  we  have  com- 
plete statistics,  the  number  of  passengers  killed  was 
only  356  and  the  number  of  trespassers  killed  5,284, 
or  fifteen  times  as  great.  And  yet  newspapers  agi- 
tate, commissions  issue  orders,  and  lawmakers  legis- 
late to  reduce  accidents  to  passengers,  and  almost  ho 
one  in  a  position  of  public  authority  does  anything  to 
reduce  the  slaughter  of  trespassers. — From  article 
entitled  "Why  5,000  Trespassers  Are  Killed  Yearly." 
Railway  Age  Gazette,  December  20,  1912. 

Most  of  the  Killed  Trespassers 

In  the  five-year  period  from  1905  to  1909,  inclusive, 
31,091  other  persons  were  killed ;  26,201  of  these  were 
trespassers.  In  the  same  period  49,786  other  persons 
were  injured,  of  which  number  28,205  were  trespass- 
ers. A  significant  feature  connected  with  these  fig- 
ures is  the  surprisingly  large  number  of  trespassers 
killed  by  being  struck  by  trains,  locomotives,  or  cars 
at  "other  points  along  the  track."  Of  the  26,291 
deaths  to  trespassers  during  this  five-year  period, 


58 

17,469  were  due  to  this  cause.  The  extremely  fatal 
nature  of  this  class  of  accidents  is  indicated  by  the 
fact  that  while  more  than  17,000  persons  were  killed, 
less  than  10,000  were  injured,  the  deaths  exceeding 
the  injuries  in  a  ratio  of  1.76  to  1.  *  *  *  In  Eng- 
land and  on  the  continent  of  Europe  walking  on  rail- 
road tracks  is  forbidden  by  law,  and  it  should  be 
here;  furthermore,  vigorous  measures  should  be  un- 
dertaken to  make  people  understand  that  railroad 
tracks  cannot  be  used  as  footwalks  with  impunity. — 
Hon.  C.  C.  McChord,  Interstate  Commerce  Commis- 
sioner, at  Milwaukee,  October  1,  1912. 

What  Safety  Means 

On  a  busy  line  a  stoppage  of  traffic  for  sixty  sec- 
onds means  a  loss  of  $250.  In  an  hour  this  loss  may 
reach  $25,000.  It  is  more  than  trebled  the  second 
hour,  and  goes  on  increasing  until  in  the  third  hour 
the  blocked  railroad  is  losing  a  thousand,  two  thou- 
sand, five  thousand  dollars  a  minute — no  one  can  cal- 
culate how  much. 

The  railroads  appreciate  better  than  the  public 
that  safety  is  cheaper  than  wrecks,  and  do  not  hesi- 
tate at  the  expenditure  of  great  sums  for  block-signal 
systems.  These  investments  have  saved  many  times 
their  cost,  but  they  do  not  put  an  end  to  wrecks. 
They  have  decreased  the  human  element  in  railway 
operation,  which  is  the  weakest  spot,  but  there  is 
still  a  huge  margin  left  for  further  improvement. — 
Thaddeus  S.  Dayton:  The  Wreckless  Railroad.  Har- 
per's Weekly,  February  22,  1913. 


INCREASE  IN  TAXATION  AND  OTHER 
COSTS. 


The  Public  Milch  Cow 

Another  item  of  expense  which  grows  out  of  all 
proportion  to  railway  revenue  or  national  develop- 
ment is  taxation.  In  1890  the  taxes  paid  by  all  the 
railroads  aggregated  $31,207,469;  in  1910  they  had 
risen  to  $103,795,701;  for  1911  they  are  estimated  at 
$109,000,000,  and  may  be  a  couple  of  millions  more. 
The  increase  in  twenty  years  up  to  1910  is  233  per 
cent.  This  is  by  direct  act  of  the  people.  The  ex- 
travagance of  all  modern  legislative  bodies,  the  doub- 
ling of  State  and  National  expenses  within  a  few 
years,  and  the  continuous  issue  of  bonds  for  all  sorts 
of  public  purposes  formerly  met  by  general  taxation 
have  drained  the  ordinary  sources  of  revenue.  The 
railroad  treasury  has  come  to  be  looked  upon  as  the 
public  milch  cow,  from  which  a  new  supply  of  nour- 
ishment may  always  be  obtained.  So  railway  taxes 
have  risen  by  leaps  and  bounds.  Each  mile  of  line 
in  the  country  paid  $199  in  taxes  in  1890  and  $431 
in  1910.— James  J.  Hill:  The  Country's  Need  of 
Or  eater  Railway  Facilities  and  Terminals.  Address 
at  annual  dinner  of  Railway  Business  Association, 
New  York,  December  19,  1912. 

The  Tax  Increase  of  Thirty  Years 

The  following  table  shows  the  aggregate  amounts 
paid  in  taxes  to  the  State  and  Federal  governments 

59 


by  the  railways  of  the  United  States  in  1880,  as 
shown  by  the  census  of  that  year,  and  in  1888,  1893, 
1898,  1903,  1908,  and  1910,  as  shown  by  the  statistical 
reports  of  the  Interstate  Commerce  Commission: 

Year.  Taxes  paid. 

1880 $13,283,819 

1888 25,435,229 

1893 36,514,689 

1898 43,828,224 

1903 57,849,569 

1908 84,599,992 

1910 103,853,576 

These  figures  show  that  in  30  years  the  amount 
collected  from  the  railways  for  the  support  of  the 
Federal  and  the  various  State  governments  has  in- 
creased almost  eight-fold. — London  Times,  American 
Railway  Number,  June  28,.  1912. 

Some  of  the  Higher  Costs  of  Railroading 

The  coal  bill  of  the  Baltimore  &  Ohio  Railroad 
Company  amounts  to  approximately  $6,000,000  per 
year,  and  within  the  last  two  years  there  has  been 
an  advance  in  the  price  of  coal  of  upward  of  10  per 
cent.  The  increase  in  price  of  ties  has  also  been  con- 
siderable. Prices  asked  and"  paid  for  locomotives, 
freight  and  passenger  cars  are  also  higher  today  than 
was  the  case  three  years  ago  for  equipment  of  the 
same  kind. 

Legislation  of  various  kinds — both  State  and  Fed- 
eral— has  had  an  important  influence  upon  expenses. 
The  so-called  Full  Crew  Bill,  which  has  become  a  law 
in  many  of  the  States,  requires  the  railroads  to  em- 
ploy an  extra  man  on  all  trains  of  more  than  certain 
length,  regardless  of  the  local  conditions. 


61 


The  hours  of  service  law,  boiler  inspection  law,  laws 
in  various  States  prescribing  standards  of  construc- 
tion for  caboose  cars,  laws  with  reference  to  the  con-  • 
struction  of  postal  cars,  revised  orders  with  reference 
to  safety  appliances  upon  new  equipment,  as  well  as 
upon  existing  equipment ;  laws  with  reference  to  grade 
separation,  etc.,  etc. — all  have  tended  to  very  greatly 
increase  the  cost  of  operation. 

Taxes  have  increased  largely  during  the  last  three 
years.  In  the  case  of  the  Baltimore  &  Ohio  Company, 
the  increase  in  that  one  item  since  1909  amounts  to 
more  than  $900,000  a  year.  I  think  it  is  perhaps  not 
a  matter  of  common  knowledge,  although  one  of  pub- 
lic record,  that  the  American  railroads,  as  a  whole, 
pay  each  year  in  taxes  more  than  $120,000,000,  a 
sum  nearly  two  and  one-half  times  as  much  as  the 
total  amount  received  by  all  the  railroads  for  carry- 
ing the  mails. 

Another  very  important  element  to  be  considered  is 
the  rate  of  interest  which  railways  are  obliged  to  pay 
upon  new  capital  raised  for  improvements  and  better- 
ments. It  may  be  said  that  the  interest  basis  on  all 
investments  has  been  raised  within  recent  years,  and 
that  the  very  best  securities  must  pay  higher  rates 
today  than  ever  before,  and  that  the  railroads  are  not 
peculiar  in  this  respect ;  but  even  so,  they  are  still  re- 
quired, in  common  with  others,  to  pay  a  much  higher 
rate  of  interest  than  was  the  case  some  five  or  ten 
years  ago.  Ten  years  ago,  for  instance,  if  a  railroad 
company  with  well-established  credit,  decided  to  in- 
crease its  capital  for  improvement  purposes — we  will 
say  $1,000,000 — it  was  customary  to  assume  that  the 
interest  charge  on  that  account  would  be  approxi- 
mately $40,000  per  year.  Under  existing  conditions, 
the  interest  charge  would  be  between  $50,000  and  $60,- 
000  per  year  as  a  minimum,  and  in  some  cases,  even 


62 

in  excess  of  $60,000.  This  item  alone,  as  you  will 
see,  becomes  very  important  when  large  systems — like 
the  Baltimore  &  Ohio — are  spending  upward  of  $20,- 
000,000  a  year,  and  ought  to  do  so,  for  betterments, 
extensions  and  new  equipment  made  necessary  by  the 
growing  demands  of  a  constantly  expanding  com- 
merce.4 

Further  the  public  demands,  expects  and  receives  a 
higher  standard  of  service  in  all  directions  than  has 
ever  been  the  case  before. — Daniel  Willard:  Before 
the  Boston  Chamber  of  Commerce,  June  12,  1913. 


THE  RAILROAD'S  DOLLAR. 


Problem  Critical  and  Urgent 

In  the  railway  industry  of  America  today  the  stock- 
holders' ,  narrow  margin  of  profit  and  the  constant 
clamor  for  higher  wages  make  the  problem  a  critical 
and  an  urgent  one.  Of  every  dollar  earned  by  the 
railway  companies,  42  cents  is  disbursed  in  the  form 
of  wages,  and  33  cents  is  available  for  improvements 
and  the  satisfaction  of  interest  and  dividend  require- 
ments. The  latter  in  1910  were  on  the  modest  basis 
of  3.79  and  3.64  per  cent,  respectively,  compared  with 
4.27  and  2.44  per  cent  in  1900.  Recent  governmental 
discouragement  of  proposed  rate  increases  makes  it 
clear  that  if  the  rights  of  capital  are  to  be  protected, 
there  can  be  no  further  increases  of  wages  which  are 
not  offset  by  corresponding  economies  in  other  direc- 
tions.— Francis  Lyster  Jandron:  Efficiency  and  the 
Railway  Wage  Problem.  Engineering  Magazine,  No- 
vember, 1912. 

How  the  Dollar  is  Divided 

The  revenue  of  the  railroads  is  collected  in  the  main 
from  the  handling  of  property  and  passengers,  and  it 
cannot  pay  out  more  than  it  takes  in.  In  1912,  out 
of  every  dollar  that  the  railroad  received,  the  follow- 
ing disposition  was  made: 


63 


Labor    direct 44.17  cents 

Fuel  and  oil,  70  per  cent  labor 8.93  " 

Material,   supplies   and  miscellaneous   ex- 
penses    14.06  " 

Loss  and  damages 2.20  " 

Taxes  .s 4.21  " 

Rents  for  leased  roads 4.41  " 

Interest  on  debt..  13.43  " 


Total    91.41 

Balance   8.59 


100.00 

Of  this  balance  3.75  cents  were  for  betterments  and 
deficits,  and  4.84  cents  for  dividends.  In  other  words, 
of  the  dollar  collected  there  had  to  be  paid  out  91.41 
cents  for  those  things  that  were  absolutely  necessary 
for  maintaining  and  operating  the  property,  paying 
taxes  and  interest,  leaving  only  the  small  balance  of 
8.59  cents  for  improvements  and  dividends. — Howard 
Elliott:  Address  before  the  Minneapolis  Chapter, 
American  Institute  of  Banking,  April  26,  1913. 

The  Value  of  a  Postage  Stamp 

•If  you  should  write  a  letter  to  an  American  railroad 
official,  his  corporation  will  have  to  haul  a  ton  of 
freight — two  thousand  pounds  of  average  freight- 
coal,  ore,  silks,  ostrich  feathers,  and  everything — for 
more  than  two  and  one-half  miles  to  get  money  enough 
to  buy  a  postage  stamp  to  send  you  an  answer.  Out 
of  that  kind  of  service  the  corporation  must  pay  its 
employees,  buy  its  materials,  pay  its  rents  and  taxes, 
interest  on  Its  debt,  and  make  its  living. — Frank  Trum- 
"bull:  Address,  March  14,  1911,  Canadian  Club  of  New 
York. 


WAGES  AND  LABOR. 


The  Highest  Wages  and  the  Lowest  Rates 

The  American  railway  pays  the  highest  wages  in  the 
world  out  of  the  lowest  rates  in  the  world,  after  hav- 
ing set  down  to  capital  account  the  lowest  capitaliza- 
tion per  mile  of  any  of  the  great  countries  of  the 
world. — James  J.  Hill:  Highways  of  Progress. 

Compulsory  Arbitration 

Compulsory  arbitration,  about  which  a  great  deal  is 
very  glibly  said  and  written,  seems  to  me  as  much  a 
misnomer  as  a  white  blackbird,  because  {he  very  idea 
of  arbitration  implies  the  voluntary  submission  of  a 
controversy. — Martin  A.  Knapp,  before  the  National 
Civic  Federation,  March,  1912. 

Labor's  View  of  Wage  Arbitrations 

There  is  no  such  thing  as  absolute  justice  in  the 
arbitration  of  wage  disputes.  Those  who  agree  to  the 
principle  cannot  in  the  nature  of  things  hope  always 
to  be  fully  sustained.  Arbitration  points  to  compro- 
mise of  extreme  views,  and  this  is  particularly  true 
when  human  welfare  or  social  justice  is  a  factor. — 
From  Minority  Report  of  P.  H.  Morrissey,  represent- 
ing the  Brotherhood  of  Locomotive  Engineers  in  Arbi- 
tration with  Eastern  Railroads. 

Sixteen  Million  People 

In  addition  to  the  1,525,000  employees  working  di- 
rectly for  the  railways,  there  are  2,500,000  in  coal 

65 


66 


mines,  steel  mills,  manufacturing  plants,  all  supplying 
what  is  necessary  for  the  railways  in  their  operations, 
who  represent  af  least  10,000,000  of  our  total  popula- 
tion. So  the  railway  employees  and  the  employees  of 
the  industries  dependent  more  or  less  on  its  mainte- 
nance on  a  sound  basis  represent  approximately  16,- 
000,000  people  whose  rights  must  be  considered. — How- 
ard Elliott:  Address  at  the  Montana  State  Fair,  Hel- 
ena, Montana,  September  26,  1910. 

Labor  Holds  Balance  of  Power 

In  the  opinion  of  the  Board  the  balance  of  power  in 
the  control  of  wages,  which  was  first  with  the  rail- 
roads, has  now  passed  to  organized  railway  labor. 
The  railroad'  operators,  under  the  control  of  national 
and  State  commissions,  and  under  the  control  of  public 
opinion,  are  weaker  than  strongly  organized  unions. 
The  latter,  without  any  control  through  commissions, 
are  of  course  also  affected  by  public  opinion,  but  not 
so  directly. 

Never  in  the  history  of  the  United  States  has  there 
been  a  concerted  strike  on  all  the  railroads  of  a  great 
section  of  the  country.  The  strikes  have  usually  been 
upon  individual  roads,  although  in  some  cases  strikes 
have  taken  place  upon  a  number  of  roads  at  the  same 
time. — Commission  in  Arbitration  between  the  Eastern 
Railways  and  the  Brotherhood  of  Locomotive  En- 
gineers, Charles  R.  Van  Hise,  chairman. 

Labor's  Large  Share 

No  one  thing,  perhaps,  so  embitters  as  a  sense  of 
injustice,  and  I  am  satisfied  that  much  of  the  resent- 
ment of  the  workman  is  due  to  his  belief  in  the  as- 
surances that  have  been  made  him  by  his  leaders  that 


67 


he  was  not  getting  his  fair  share  of  the  joint  product, 
and  it  is  highly  important  that  the  facts  with  regard 
to  this  be  determined  and  be  widely  diffused.  I  am 
not  aware  of  any  considerable  body  of  information 
regarding  the  relative  contributions  to  value  by  the 
property  owners,  the  brain  workers,  and  the  manual 
workers.  It  would  seem  desirable  to  undertake  a 
physical  valuation  of  labor.  Were  this  done  it  would 
probably  be  found  that  in  most  industries  the  wages 
of  labor  are  substantially  in  excess  of  the  contribu- 
tion made  by  labor  to  the  value  of  the  product  *  *  * 
If  we  reflect  that  the  total  maintenance  of  way  ex- 
penses of  the  roads  of  the  country  are  about  $300,- 
000,000  annually,  and  that  of  these  expenses  the 
moneys  paid  out  for  labor  amount  to  56  per  cent,  while 
all  the  other  expenses  amount  to  but  44  per  cent,  it 
would  seem  to  justify  the  suggestion  that  your  asso- 
ciation devote  at  least  a  substantial  part  of  your  work 
to  the  study  of  labor.  I  would,  therefore,  urge  that, 
to  the  present  list  of  regular  committees,  there  be 
added  a  committee  on  maintenance  of  way  labor, 
whose  duties  shall  be  to  investigate  the  conditions  of 
employment  of  and  the  relation  of  maintenance  of 
way  labor  to  seasonal  supply  and  demand. — L.  F. 
Loree:  Address  at  annual  linner  of  American  Rail- 
way Engineering  Association,  Chicago,  March,  1912. 

No  Serious  Strike  Since  Erdman  Act 

There  has  not  been  a  railway  strike  of  any  serious 
consequence  since  the  Erdman  act  has  been  made 
effective.  The  organizations  have  availed  themselves 
of  this  act  as  often  as  have  the  companies,  and  there 
is  but  one  instance  where  a  strike  occurred  after  medi- 
ation had  begun,  and  that  strike  resulted  disastrously 
to  the  organization  responsible  for  it.  In  the  contro- 


68 


versy  which  resulted  in  the  present  arbitration  neither 
side  showed  a  disposition  to  take  advantage  of  the 
act  The  engineers  were  prepared  to  strike  and  the 
railways  were  willing  that  they  should  strike;  or,  if 
they  felt  differently  about  it,  they  at  no  time  made 
this  known.  Their  position  did  not  indicate  any  fear 
of  the  power  of  the  organization  or  any  lack  of  ability 
to  handle  a  situation  which  might  grow  out  of  a 
strike.  Fortunately  for  the  public's  interest  the  inter- 
vention of  Judge  Knapp  and  Commissioner  Neill,  al- 
though without  authority  under  the  law,  did  that  which 
neither  the  railways  nor  the  engineers  appeared  dis- 
posed to  do,  and  thus  averted  a  test  of  strength. — From 
Minority  Report  of  P.  H.  Morrissey,  representing  the 
Brotherhood  of  Locomotive  Engineers  in  Arbitration 
with  the  Railroads,  1912. 

Canadian  Disputes  Act 

The  Canadian  Industrial  Disputes  act,  passed  in 
1907,  is  broader  than  the  Erdman  act  in  that  it  pro- 
vides not  only  for  the  settlement  of  disputes  between 
railroads,  but  industries  in  general.  This  act  is  a 
distinct  advance  over  the  Erdman  act  in  that  no 
strike  or  lockout  can  be  made  by  a  party  to  a  contro- 
versy until  the  difficulties  have  been  investigated  and 
recommendations  made.  For  each  case  of  arbitra- 
tion a  separate  board  is  appointed.  Of  these  there  has 
been  109  to  the  end  of  1911.  During  the  five  years  of 
the  existence  of  this  law,  from  1907  to  1911,  inclusive, 
there  have  been  only  twelve  industrial  disputes  in 
which  strikes  have  not  been  averted  or  ended,  and  this 
for  all  of  Canada  for  all  industries. — Commission  in 
Arbitration  between  the  Eastern  Railroads  and  the 
Brotherhood  of  Locomotive  Engineers. 


69 


Prosperity  and  Railroad  Progress 

The  business  man  has  still  another  interest  In  the 
prosperity  of  his  railway  partner.  There  are  on  the 
payrolls  of  the  railways  of  the  United  States  more 
than  a  million  and  a  half  of  employees.  The  purchas- 
ing power  of  each  member  of  this  vast  army  is  depend- 
ent upon  the  maintenance  of  the  wage-paying  power 
of  the  railways.  The  money  received  by  railway  em- 
ployees finds  its  way  through  all  the  channels  of  trade 
and  is  a  factor  of  local  business  importance  in  prac- 
tically every  community  in  the  United  States.  The 
railways  are  also  large  purchasers  of  the  products  of 
industries  which  in  turn  support  another  vast  army  of 
employees.  Through  these  channels,  the  benefits  of 
the  maintenance  of  wage-paying  and  purchasing  power 
are  so  widely  distributed  as  to  reach  directly  or  in- 
directly practically  every  individual  in  the  United 
States,  whatever  may  be  his  business  or  occupation. 
This  interest  of  the  business  man  in  the  railways  was 
very  well  expressed  in  an  address  by  one  of  the  most 
prominent  merchants  of  the  United  States,  in  which 
he  said: 

"Let  any  merchant  look  over  his  records  for  years ; 
let  him  note  the  fat  years  and  the  lean  years ;  let  him 
then  mark  the  years  of  railroad  extension  and  rail- 
road improvements — of  railroad  spending.  Let  him 
mark  on  the  other  side  the  years  of  railroad  retrench- 
ment, and  he  will  find  that  the  years  when  his  pros- 
perity has  waned  have  been  the  years  when  the  rail- 
roads were  not  progressing." — William  W.  Finley:  The 
Railway  as  the  Business  Man's  Partner.  One  of  a 
series  of  lectures  prepared  for  the  Alexander  Hamil- 
ton Institute,  New  York  City,  1911. 


70 


Labor's  Demands  on  Railroads 

But  railroad  corporations  are  not,  primarily,  manu- 
facturers or  miners.  They  produce  no  articles  for 
sale.  They  are  carriers  by  land  for  hire,  just  as  the 
wagoner  or  the  carriage-driver  is,  but  with  the  fur- 
ther difference  that  in  return  for  the  exercise  of  the 
sovereign  power  in  their  behalf  they  are  bound  to  a 
public  service  which  they  cannot  evade.  They  are  en- 
gaged, by  day  and  night,  in  the  constant  performance 
of  a  personal  service  to  each  passenger  who  travels 
and  to  each  shipper  of  freight.  They  have,  too,  a  spe- 
cial contract  with  the  Post-Office  Department  affecting 
every  one  who  reads  a  newspaper  or  writes  a  letter. 

With  this  public  burden  to  carry,  an  obligation  es- 
sential to  their  corporate  existence,  they  are  at  a  dis- 
advantage when  they  come  to  trying  conclusions  with 
their  employees.  The  lockout  is  forbidden  to  them  as 
a  measure  of  defense.  They  can  neither  close  up  their 
stations  nor  stop  their  trains.  If  the  railroad  manage- 
ment cannot  agree  with  the  men  as  to  the  terms  and 
conditions  of  its  employment,  it  must,  at  its  peril,  find 
competent  men  to  replace  them  and  in  numbers  suffi- 
cient to  maintain  its  service  without  inconvenience  to 
its  patrons.  The  public  will  be  satisfied  with  nothing 
less,  and  so  long  as  the  men  abstain  from  violence,  the 
corporation  and  its  representatives  are  alone  held  to 
account  by  the  laws,  by  the  many  persons  incon- 
venienced, and  by  the  newspapers.  Under  such  a 
pressure,  what  wonder  that  railroad  managers  yield 
to  demands  to  which  their  judgment  does  not  give  as- 
sent, or  that  employees  gain  from  each  successful  step 
the  assurance  of  submission  to  yet  further  demands? 
And  when  may  we  expect  these  demands  to  cease? 
Are  they  to  be  limited  only  by  the  desires  of  those 


71 

who  are  in  a  position  to  enforce  them?  There  Is  an- 
other limit — the  financial  ability  *of  the  corporations 
to  satisfy  them. — Henry  Stevens  Haines:  American 
Railroad  Management. 

A  Tribute  to  Railroad  Men 

The  men  who  actually  operate  our  railroads,  who 
keep  the  intricate  wheels  of  this  mighty  machine  con- 
stantly in  motion  and  always  at  our  service,  receive 
too  little  public  acknowledgment  for  the  work  they 
perform.  They  are  among  the  most  skilled,,  capable, 
and  honest  of  our  business  and  professional  men. 
They  have  an  enthusiasm  in  their  work  and  a  loyalty 
to  their  companies  that  is  a  constant  satisfaction,  and 
their  delinquencies  too  often  may  be  traced  to  policies 
which  purely  as  railroad  men  they  would  not  counte- 
nance. With  these  men  we  can  work,  and  through 
them  we  may  hope  for  the  realization  of  a  national 
system  of  railroads  that  will  be  fair  as  to  rates,  profit- 
able as  to  income,  and  adequate  as  to  service. — Frank- 
lin K.  Lane,  World's  Work,  March,  1913. 

The  Labor  Organization 

Perhaps  the  greatest  barrier  to  the  introduction  of 
any  system  designed  to  accomplish  savings  which  will 
diminish  the  number  of  employees  is  the  labor  organ- 
ization. Practically  every  branch  of  the  railroad  serv- 
ice is  strongly  organized  and  militant.  The  manu- 
facturer has  his  labor  problem  also;  but  he  can  close 
down  his  plant  or  lock  out  his  men  if  he  sees  fit.  With 
railroads,  resistance  to  demands  considered  by  them 
as  unreasonable  must  not  be  allowed  unduly  to  affect 
service.  Trains  must  be  kept  moving  at  any  cost,  and 
if  men  cannot  be  had  to  take  the  place  of  striking 


72 


employees,  or  If,  before  a  strike  is  declared,  it  Is  plain 
that  resistance  is  useless,  the  company  must  make  the 
best  terms  it  can,  and  maintain  peace. — William  J. 
Cunningham:  Scientific  Management  in  the  Operation 
of  Railroads.  Quarterly  Journal  of  Economics,  May, 
1911. 

Responsibility  of  Labor  Organizations 

Organized  labor  is  constant  in  its  endeavor  to  bene- 
fit its  members,  and  has  done  good;  but  it  should 
guard  against  the  danger  of  unlimited  power.  Great 
power,  unrestricted  and  constantly  successful,  requires 
a  broader  control,  consideration,  and  direction,  and 
there  is  constant  danger  that  in  the  exercise  of  such 
power  it  may  encroach  upon  the  right  of  those  not 
possessed  of  equal  power  and  strength. 

Stating  my  own  personal  views,  it  is  proper  to  regu- 
late the  common  carrier;  but  it  is  equally  as  essential 
to  regulate  labor  organizations  engaged  in  public  trans- 
portation, the  purpose  being  to  maintain  the  principles 
of  property  rights  and  the  continued  prosperity  of 
this  country  under  our  immediate  civilization. — J.  C. 
Stuart,  before  Board  of  Arbitration  in  Engineers'  Con- 
troversy, July  26,  1912. 

Wages  and  Rates;  Their  Increases  Compared 

The  increase  in  the  wage  scale  has  been  a  promi- 
nent factor  in  the  demand  for  an  advance  in  rates; 
yet  the  relation  of  this  advance,  in  total  amount,  to 
the  total  increase  in  the  cost  of  service  from  that 
cause  varies  widely  in  the  estimates  made  by  nineteen 
companies  that  were  to  be  benefited  by  it.  These  esti- 
mates totaled  the  yearly  increase  in  wages  at  $22,- 
843,000,  and  the  increased  revenue  from  the  advance 


73 

in  rates  at  $21,527,000?  so  that  the  totals  approxi- 
mately balanced  each  other.  Yet  the  separate  esti- 
mates were  far  from  doing  so.  Some  examples  of  this 
difference  were  as  follows: 

Increase  Increase 

in  wages.  in  rates. 

$7,000,000  $3,000,000 

1,480,000  1,954,000 

1,069,000  1,797,000 

910,000  1,244,000 

372,000  84,000 

288,000  699,000 

186,000  14,000 

160,000  228,000 

153,000  71,000 

With  such  disparities  as  these,  how  is  it  practicable 
to  base  a  reasonable  rate  upon  the  cost  of  service  as 
applied  to  different  classes  of  freight? — H.  8.  Haines: 
Problems  in  Railway  Regulation. 

No  Doctrine  of  Hatred  for  Labor 

I  believe  it  will  be  accepted  as  a  principle  of 
democracy  that  the  interests  of  the  whole  people  are 
greater  than  those  of  any  class,  even  its  largest  class, 
and  that  the  interests  of  any  class  shall  predominate 
only  when  shown  to  be  identical  with  the  welfare  of 
the  mass.  Organized  labor  cannot  advance  the  inter- 
ests of  the  worker  by  holding  itself  aloof  from  the 
other  groups  which  go  to  make  up  society.  It  should 
be  able  and  prepared  to  state  its  principles  and  de- 
fend them  anywhere.  It  cannot,  in  my  judgment, 
ultimately  succeed  by  preaching  the  doctrine  of  hatred, 
or  encouraging  labor  to  withhold  its  recognition  of 
these  great  public  questions,  because,  perchance,  labor 


74 


would  be  associated  with  some  of  its  enemies,  past  or 
present. — P.  H.  Morrissey:  Speech  at  Railway  Em- 
ploye's' Picnic  at  Galesburg,  III.,  June,  1911. 

If  Wages  Are  Increased,  Why  Not  Rates? 

Suppose  organized  railway  labor  makes  a  further 
demand  for  increased  wages,  and  that  the  railroads 
accede  to  this  demand.  The  increased  wage  adds  to 
the  expense  of  operation  and  reduces  net  revenue. 
The  railroad  applies  to  the  Interstate  Commerce  Com- 
mission for  leave  to  advance  its  rates  on  this  account. 
What  now  is  to  be  the  answer  of  the  Commission? 

The  railway  rate  is  paid  by  the  whole  body  of  the 
public.  If,  therefore,  this  increase  in  -wages  was  un- 
justifiable, and  if  on  that  account  an  increase  in  rate 
is  allowed,  it  results  that  the  general  public,  including 
all  other  forms  of  labor,  is  required  to  pay  what  is 
unreasonable.  Must  not,  therefore,  the  Government 
be  satisfied,  not  only  that  the  added  wages  are  paid 
by  the  railroads,  but  that  they  are  necessarily  and 
properly  paid?  And  is  not  the  railroad  thus  placed 
in  a  most  unfortunate  and  embarrassing  dilemma? — 
Chas.  A.  Prouty:  Address,  March  28,  1912,  at  tenth 
annual  banquet  of  the  Traffic  Club  of  Pittsburgh,  held 
at  Fort  Pitt  Hotel,  Pittsburgh,  Pennsylvania. 

Clearing  House  for  Labor  and  Supplies 

The  railroads  are  not  only  the  great  transportation 
agencies  of  the  country,  but  I  invite  your  attention  to 
the  more  intimate  fact  that  they  are  in  a  large  sense 
but  a  clearing-house  for  labor  and  supplies.  They 
collect,  to  pay  out  again. — Wm.  Sproule,  at  the  annual 
dinner  of  the  Chamber  of  Commerce  of  San  'Francisco, 
December  9,  1912. 


75 


Ten  Millions  Supported  by  Railways 

You  get  some  idea  of  the  Immensity  of  the  railway 
business  when  you  understand  that  roughly  there  are 
two  million  men  on  the  payrolls  of  Jhe  railway  com- 
panies of  this  country,  including  everybody,  froni  the 
president,  who  sits  at  a  mahogany  desk,  to  the  office 
boy,  who  answers  the  president's  bell ;  from  the  chief 
engineer,  who  supervises  the  plans  for  a  million-dollar 
bridge,  to  the  man  who  works  in  overalls,  seeing  that 
every  bolt  In  that  bridge  is  in  place;  and  the  men  in 
overalls  form  the  great  army  of  railway  employees, 
while  the  presidents  and  chief  engineers  constitute 
only  a  fractional  percentage.  Two  million  men  repre- 
sent ten  million  persons,  for  statisticians  assume  that 
every  man  is  the  head  of  a  family,  and  the  average 
family  consists  of  five  persons,  which  is  fairly  accu- 
rate on  a  large  scale;  so  that  ten  million  persons,  or 
one-tenth  of  the  entire  population  of  the  United  States, 
are  dependent  upon  the  railways  for  their  support. 
There  Is  no  other  industry  to  compare  with  it  In  this 
country — none  other,  In  fact,  In  the  world.  If  It  were 
possible  to  imagine  all  the  railroads  suddenly  com- 
pelled to  cease  doing  business,  one  can  conceive  the 
distress  and  suffering  that  would  follow. — A.  Maurice 
Low:  The  Railways  and  the  Public.  Harper's  Weekly, 
August  31,  1912. 

Ultimate  Wages 

The  firemen's  vote  on  the  strike  question  is  bringing 
to  the  fore  the  query  whether  there  is  an  ultimate 
limit  above  which  railroad  wages  will  not  go,  or 
whether  the  rise  is  to  keep  on  absorbing  the  total  rail- 
way income  until  there  is  little  or  nothing  left  for 


76 


dividends  and  interest.  In  view  of  the  anti-corpora- 
tion sentiment  which  actuates  both  legislators  and 
voters,  railway  managers  may  he  pardoned  for  what 
might  otherwise  be  their  cowardice  in  shrinking  from 
calling  a  halt.  The  following  exhibit,  however,  makes 
it  clear  that  it  is  only  a  matter  of  time  when  a  halt 
will  necessarily  have  to  be  called  in  order  to  protect 
the  capital  which  stock  and  bondholders  have  already 
invested : 

Per  cent 

Y*ftr  Gross  Aggregate  R.  R.          of  wages 

earnings.  wages,  U.  S.  A.  to  gross 

earnings. 

1912 $2,895,690,325  $1,243,677,738*  42 . 95 

1911 2,841,190,738  1,193,701,522  42 . 01 

1910 2,817,721,735  1,143,725,306  40 . 59 

1909 2,468,734,760  988,323,694  40.03 

1908 2,457,821,131  1,035,437,528  42 . 13 

1907 2,649,731,911  1,072,386,427  40 . 47 

1906 2,386,285,473  900,801,653  37 . 75 

1905 2,134,208,156  839,944,680  39 . 36 

1904 2,024,555,061  817,598,810  40 . 38 

1903 1,950,743,636  757,321,415  38 . 82 

'Estimated. 

Reflection  upon  the  fact  that  it  now  requires  42.95 
per  cent  of  gross  earnings  to  cover  the  wage  bill 
against  38.82  per  cent  In  1903,  and  even  less  in  1906, 
disposes  of  all  doubt  as  to  the  necessity  to  call  a  hatt. 
How  long  is  It  physically  possible  for  this  absorption 
of  gross  earnings  to  keep  on  increasing?  The  propor- 
tion absorbed  by  wages  has  grown  by  10.64  per  cent 
of  Itself  during  the  past  nine  years,  and  a  similar  rate 
of  increase  must  be  expected  so  long  as  railway  man- 
agers, however  excellent  their  reasons,  continue  yield- 
ing to  the  demands  made. 


77 


It  requires  57.5  per  cent  of  gross  earnings  to  cover 
wages,  dividends,  and  surplus  after  dividends  com- 
bined ;  but  at  the  rate  wages  are  absorbing  gross  earn- 
ings these  wage  payments  alone  by  1938  will  consume 
57.5  per  cent  of  gross.  Moreover,  It  requires  71.7  per 
cent  of  gross  to  cover  wages,  dividends,  surplus  and 
interest  combined;  and  by  1958,  at  the  present  actual 
rate  of  Increase,  wages  alone  will  absorb  this  71.7  per 
cent. 

The  compensation  of  railroad  employees  has  seem- 
ingly Increased  faster  than  that  of  other  workmen  In 
the  United  States,  and,  Indeed,  even  more  rapidly  than 
that  of  the  whole  people,  Including  the  Income-receiv- 
ing classes.  During  the  past  ten  years,  for  example, 
engineers'  pay  has  Increased  about  26.9  per  cent,  as 
compared  with  21  per  cent  for  the  general  average  of 
all  wages,  and  with  about  22.8  per  cent  for  the  aver- 
age per  capita  wealth  of  all  the  people. 

However,  the  most  striking  fact  is  that  at  the  pres- 
ent actual  rate  of  increase  railroad  wages  would  leave 
nothing  for  dividends  by  1938,  would  put  all  the  rail- 
roads Into  receivers'  hands  by  1948,  and  would  leave 
nothing  for  Interest  payments  by  1958. — Wall  Street 
Journal,  January  25,  1913. 

Permanent  National  Wage  Commission 

One  of  the  recommendations  made  by  the  board 
which  arbitrated  the  recent  controversy  between  the 
Eastern  railways  and  their  engineers — and  which,  if 
carried  out,  should  result  in  a  most  radical  change  for 
the  better  from  the  present  unsatisfactory  conditions — 
was  in  respect  to  the  creation  of  a  permanent  national 
wage  commission  to  arbitrate  differences  between  the 
railways  and  their  employees  in  order  to  prevent 
strikes,  effect  equitable  adjustments  of  working  concU- 


78 


tlons  and  wages,  and,  at  the  same  time,  protect  the 
rights  and  interests  of  the  roads,  their  employees,  and 
the  public. 

This  particular  arbitration  case  Is  probably  the  most 
Important,  and  the  result  will  doubtless  be  the  most 
far-reaching  of  any  that  has  yet  been  presented  In  the 
history  of  organized  labor  In  this  country,  involving 
as  it  did,  the  Brotherhood  of  Locomotive  Engineers, 
representing  31,840  locomotive  engineers;  fifty-two 
railroads,  representing  56,876  miles  of  main  track — 
or  over  25  per  cent  of  the  total  main  track  mileage  in 
the  United  States — handling  from  42  to  47  per  cent  of 
the  total  traffic  of  the  country,  and  affecting  a  popu- 
lation tributary  to  these  fifty-two  roads  of  over  32,- 
000,000  people.  In  this  controversy,  of  course,  the 
public  did  not  directly  participate ;  but,  as  can  be  easily 
appreciated,  and  as  is  so  lucidly  set  forth  In  the  re- 
marks of  the  board  of  arbitration,  the  Interests  of 
the  public  are  most  vitally  concerned — indeed,  their 
Interests  are  paramount. 

If  31,840  engineers,  through  their  organization,  can 
inaugurate  a  strike,  thereby  jeopardizing  the  business 
Interests  not  only  of  the  32,000,000  people  in  the  dis- 
trict directly  affected,  but  also  Indirectly  a  still  greater 
number,  It  is  apparent  that  some  measures  must  be 
taken  to  protect  the  rights  of  the  public,  and  this  can 
only  be  done  through  the  establishment  of  a  commis- 
sion such  as  is  recommended  by  the  board  of  arbitra- 
tion. Capital  need  have  no  apprehension  from  the 
establishment  of  such  a  commission,  and,  to  Judge 
from  the  results  of  their  political  activity  In  the  past, 
organized  labor  should  have  no  hesitation  In  Indorsing 
the  plan  proposed. 

The  present  restrictive  policy  in  respect  to  the  regu- 
lation of  railroad  rates  and  operation  has  been 


79 


adopted,  and  is  being  carried  out  with  the  hearty  sup- 
port of  the  public.  This  policy  has  already  resulted 
in  limiting  the  earning  power  of  the  railroads,  and, 
if  persisted  in,  will  ultimately  impair  the  credit  of  the 
railroads,  rendering  them  incapable  of  expansion  and 
of  making  much-needed  improvements  to  keep  up  with 
the  commercial  and  agricultural  development  of  the 
country.  If  the  public  continues  to  indorse  this  policy 
of  regulation,  it  should  be  willing  at  least  to  protect 
the  railroads  in  so  far  as  possible  from  the  excessive 
and  unreasonable  demands  made  upon  them  by  their 
employees  and  enforced  through  their  various  organi- 
zations by  threats  of  strike,  which  affect  not  only  the 
district  directly  involved,  but  also  indirectly  those 
districts  far  distant  from  the  actual  scene  of  contro- 
versy. 

The  establishment  of  such  a  national  commission 
as  recommended  would  prove  economical,  undoubt- 
edly would  result  in  a  more  equitable  adjustment  to 
all  the  parties  concerned,  and,  this  being  a  Federal 
commission,  all  the  proceedings  would  be  spread 
broadcast,  and  in  this  way  the  general  public  would 
be  kept  fully  informed  as  to  the  points  in  controversy 
and  the  justness  of  the  demands  made. 

Until,  however,  such  a  commission  shall  be  estab- 
lished, these  wage  questions  must  necessarily  continue 
to  be  handled  as  heretofore,  and  the  public  will  sooner 
or  later  be  brought  to  realize  what  an  unsatisfactory 
method  it  is,  for  in  the  end  the  public  is  the  party 
most  vitally  affected. — B.  A.  WortMngton,  President 
Chicago  and  Alton  Railroad:  Wages  Board  Needed. 
New  York  Times,  January  5,  1913. 


80 


Wages  Here  and  in  Europe 

The  engineers  pulling  the  train  between  Paris  and 
Cherbourg  receive  two  dollars  and  seven  cents,  In  con- 
trast to  ten  dollars  and  twenty-five  cents  paid  the  engi- 
neers handling  the  trains  between  Cincinnati  and 
Cleveland;  and  the  conductors  one  dollar  and  thirty- 
one  cents,  in  contrast  to  seven  dollars  and  twenty- 
three  cents  paid  on  the  run  in  Ohio. 

In  other  words,  while  the  passenger  fare  in  France 
is  sixty-nine  per  cent  greater,  the  wages  paid  here  to 
engineers  and  conductors  are  four  hundred  per  cent 
greater  than  those  paid  in  France. 

Between  London  and  Liverpool,  a  distance  of  two 
hundred  miles,  the  first-class  passenger  fare,  including 
one  hundred  and  fifty  pounds  of  baggage,  is  seven  dol- 
lars and  eight  cents,  while  from  Cincinnati  to  Toledo, 
a  distance  of  two  hundred  and  eleven  miles,  the  fare, 
including  a  parlor-car  seat  and  one  hundred  and  fifty 
pounds  of  baggage,  is  only  four  dollars  and  seventy-five 
cents. 

The  engineers  handling  the  train  from  London  to 
Liverpool  receive  two  dollars,  in  contrast  to  eight  dol- 
lars and  twenty  cents  paid  engineers  for  the  run  be- 
tween Cincinnati  and  Toledo,  and  the  wages  of  con- 
ductors and  firemen  bear  approximately  the  same  rela- 
tion.— W.  C.  Brown:  Address  at  annual  dinner  of  Rail- 
way Young  Men's  Christian  Association  at  Columbus, 
Ohio,  February  4,  1911. 


SOME  OF  THE^PRESSING  NEEDS. 


J.  J.  Hill's  Famous  Predictions 

It  was  in  January,  1907,  that  James  J.  Hill  sent  his 
famous  letter  to  the  Governor  of  Minnesota,  telling  of 
the  need  of 'the  railroads  of  the  country  to  spend  at 
least  $1,100,000,000  annually  on  construction  for  the 
next  five  years  if  they  would  handle  the  business  of 
the  country  adequately,  Three  years  and  a  half  later 
he  was  telling  the  railroad  men  that  without  more 
extensive  terminals  the  traffic  of  the  country  would  be 
blocked.  Both  predictions  were  borne  out  by  facts.  It 
has  been  proved  that  the  railroads  are  falling  behind 
in  the  country's  progress.  Beset  by  legislatures  and 
railroad  commissions,  they  find  it  increasingly  more 
difficult  to  sell  the  securities  that  will  give  them  the 
needed  improvements  in  the  way  of  additional  tracks 
and  terminals.  That  they  didn't  spend  a  billion  dol- 
lars annually  in  new  construction,  or  anything  like  it, 
after  1907  is  well  known.  The  result  is  that  now  they 
must  raise  the  average  of  expenditure  or  fall  still 
farther  behind.  That  is  one  of  the  points  they  are 
trying  to  impress  upon  their  regulators,  but  without 
much  success.  "The  men  who  are  making  the  laws," 
Mr.  Hill  said,  "do  not  know  the  effects  of  their  own 
acts,  and  they  do  not  know  what  they  are  legislating 
about.  They  think,  as  one  of  them  expressed  it,  that 
the  railroads  are  there  and' cannot  get  away." — Rail- 
way Record,  April  19,  1913. 


81 


Why  Railroads  Require  More  Money 

We  have  today  the  lowest  railroad  capitalization 
per  mile  of  any  great  country  in  the  world,  much 
lower  than  in  any  of  the  great  European  countries. 

It  is  impossible  to  continue  this  building  and  de- 
veloping of  railroads  without  more  capital.  To  ob- 
tain that  capital,  the  railroads  must  have  credit; 
credit  that  will  withstand  the  scrutiny  of  the  banker 
of  Lombard  street,  as  well  as  appeal  to  the  investor 
in  Philadelphia.  That  credit  cannot  be  assured  and 
maintained  unless  the  railroads  are  permitted  to  earn 
sufficient  revenue  to  have  left  over  at  the  end  of  the 
year  a  surplus  out  of  which  to  make  the  necessary  im- 
provements which  do  not  add  to  the  earning  power  of 
the  company,  and  which  yet  assure  the  investor  of 
the  productive  value,  both  now  and  prospective,  of  the 
enterprise  in  which  he  proposes  to  put  his  money. 

The  railroads  of  this  country  pay  the  highest  wages 
of  any  country  in  the  world.  They  pay  more  to  the 
support  of  the  Government  in  taxation,  proportioned 
to  the  capital  invested,  than  is  paid  in  any  country  in 
the  world.  They  do  their  work  upon  less  capital,  and 
they  do  more  work  upon  their  capital,  than  is  done  in 
any  country  hi  the  world. 

In  addition,  the  railroads  of  this  country  haul 
freight  cheaper  than  is  done  in  any  other  country  in 
the  world.  Confronted,  therefore,  with  such  costs  as 
have  been  noted,  not  to  speak  of  the  growing  cost  of 
materials  and  wages,  is  it  not  absolutely  proper  that 
the  railways  should  ask,  on  their  own  behalf  as  well 
as  on  behalf  of  the  public  they  seek  to  serve,  that  a 
small  increase  be  made  in  the  rates  of  freight? — 
Samuel  Rea:  Letter  to  Philadelphia  Ledger,  May  9, 
1913. 


83 


Labor's  View  of  the  Railroad's  Great  Need 

I  believe  that  the  masters  of  finance,  such  as  repre- 
sented by  Mr.  Morgan  and  others,  are  absolutely  right 
when  they  say  they  have  reached  the  limit  of  economy 
in  railroad  operation.  I  don't  believe  it  is  possible  to 
do  any  more  along  that  line,  and  I  agree  with  them 
that  anything  in  the  future  toward  improvement  will 
have  fc/be  by  addition  or  increase  to  freight  rates. 
There  never  was  a  time  in  history  of  the  railroads 
when  so  much  was  demanded  as  now.  There  never 
was  a  time  when  so  much  was  demanded  along  the 
line  of  fast  traffic,  high  speed,  splendid  roadbeds  and 
a  thousand  and  one  other  things,  and  there  never  was 
a  time  when  the  railroads  were  in  need  of  more  money 
to  make  improvements,  build  terminals  and  other 
things  needed  as  now,  and  the  only  hope  for  them  is  in 
an  increased  freight  rate. — Warren  S.  Stone:  Efficiency 
as  tlie  Employe*  Sees  It.  llth  annual  meeting  National 
Civic  Federation. 

Increased  Service  and  More  Money 

In  a  growing  country,  such  as  the  United  States, 
there  is  a  constant  demand  for  increased  transporta- 
tion service,  calling  for  additional  facilities  on  existing 
railways  and  the  construction  of  new  lines.  It  is 
transportation  which  has,  more  than  any  other  one 
agency,  made  the  United  States  the  wonderfully  pro- 
gressive and  prosperous  country  it  is.  Transportation 
companies  have,  in  the  face  of  steadily  lowered  rates, 
increased  the  extent  and  raised  the  quality  of  their 
service,  and  at  the  same  time  steadily  increased  their 
expenditures  and  the  work  for  the  development  of  the  , 
country.  Without  transportation  facilities  its  develop- 
ment would  have  been  retarded  and  its  progress  slow. 


84 


A  growing  railway  has  constant  need  of  money. 
The  provision  of  additional  facilities  will  call  for  the 
investment  of  large  amounts  of  new  capital  in  railway 
enterprises.  Investors  naturally  seek  those  fields  in 
which  the  prospects  for  returns  are  fair  and  reason- 
ably assured.  They  will  put  their  money  into  railway 
enterprises,  therefore,  only  if  the  returns  from  invest- 
ments in  railway  properties  are  approximately  equal 
to  the  returns  secured  from  capital  invested  in  other 
kinds  of  business.  Whether  or  not  this  shall  be  true, 
and  railway  development,  with  its  advantages  for  rail- 
way men,  affording  an  ever-widening  field  for  employ- 
ment and  promotion,  is  to  continue  will  depend  in 
large  measure  upon  the  efficiency  with  which  the  prop- 
erties are  operated. 

This  is  particularly  true  in  the  present  era  of  rail- 
way regulation  by  State  and  Federal  authority.  I 
should  not  be  construed  as  criticising  the  policy  of 
governmental  regulation  within  its  proper  field.  I  am 
speaking  of  it  on  this  occasion  merely  for  the  purpose 
of  directing  attention  to  its  bearing  on  the  subject  I 
am  discussing.  If  the  demand  for  the  product  of  a 
farm  or  a  manufacturing  establishment  is  such  as  to 
make  an  advance  in  price  possible,  the  margin  between 
the  cost  of  production  and  the  selling  price  can  be 
increased  by  the  simple  method  of  advancing  the  lat- 
ter. But  the  railways  of  the  United  States  are  not 
free  to  advance  the  price  of  their  product.  Whatever 
may  be  the  demand  for  transportation,  the  price  can- 
not be  increased  without  first  securing  governmental 
approval,  which  will  always  be  a  difficult  thing  to  do. 
As  a  result  of  this  condition,  substantially  the  only 
way  in  which  a  railway  can  increase  the  margin  be- 
tween the  cost  of  producing  transportation — the  ex- 
pense unit — and  its  selling  price — the  earning  unit — 
is  by  greater  efficiency  of  operation — by  more  efficient 


85 

solicitation,  whereby  a  larger  volume  of  traffic  may  be 
secured,  and  by  greater  efficiency,  whereby  the  traffic 
may  be  handled  at  a  reduced  cost. — W.  W.  Finley: 
Address  before  Richmond  Railroad  Club,  Richmond, 
April  4,  1912. 

Looking  to  the  Future 

Economy  of  Management. — It  has  been  urged  before 
the  master  with  reference  to  the  lines  of  railway 
under  consideration  that  the  evidence  discloses  want 
of  economical  management,  in  that  limited  portions  of 
the  business  were  unremunerative  and  not  infre- 
quently resulted  in  loss. 

If  the  convenience  and  demands  of  the  public  were 
disregarded,  greater  economy  could  doubtless  be  exer- 
cised. Full  cars  and  long  trains  at  fewer  intervals 
would  be  a  great  saving  of  cost,  and  to  this  end  pro- 
duce could  be  stored  in  elevators  awaiting  shipment 
under  the  most  economical  conditions.  Needless  to 
say  that  this  would  result  in  great  public  incon- 
venience and  dissatisfaction,  and  recourse  ,to  such 
methods  is  unthinkable.  The  carrier  must  properly 
yield  to  public  demand  and  recoup  for  loss  on  other 
portions  of  its  business. 

It  is  also  urged  that  as  to  some  of  the  roads  surplus 
lands  and  equipment  are  disclosed  much  beyond  pres- 
ent needs.  But  it  is  good  business  sense  to  anticipate 
and  prepare  for  the  requirements  of  the  near  future. 
Readiness  to  serve  is  of  the  highest  importance  to 
those  requiring  service,  and  an  efficient  management 
will,  if  practicable,  take  advantage  of  the  markets  and 
buy  what  will  soon  be  needed  when  it  can  be  obtained 
at  a  reasonable  price,  and  not  wait  until  it  must  be 
had  regardless  of  cost.  Present  patrons  are  not  to  be 
burdened  for  the  benefit  of  those  to  be  acquired  in  the 


distant  future,  but  they  can  well  afford  to  pay  a  some- 
what higher  rate,  that  they  themselves  in  the  near 
future  may  enjoy  a  cheaper  and  better  service.  It  is 
proper  for  the  carrier  not  only  to  provide  itself  with 
ample  facilities  for  the  efficient  conduct  of  its  present 
business,  but  also  to  anticipate  demands  soon  to  be 
made  as  the  country  becomes  more  prosperous,  and  it 
is  entitled  to  revenue  sufficient  for  such  purpose. — 
Extract  from  Judge  Otis' s  report  in  the  Minnesota 
Rate  Case. 

More  Expenses  and  More  Laws 

Consider  the  position  of  the  railroads  of  the  coun- 
try for  the  past  few  years,  and  in  no  district  is  this 
more  apparent  than  in  the  eastern  section  of  the 
United  States,  where  the  railroads  are  at  present  ask- 
ing for  a  slight  advance  in  rates.  The  Pennsylvania 
Railroad  Company  is  as  good  an  example  as  can  be 
found.  In  1901  for  every  dollar  we  earned  it  cost  us, 
including  taxes,  67.7  cents  to  operate  and  maintain  the 
road ;  for  every  dollar  received  in  1912  it  cost  us  over 
78  cents  for  actual  operation  and  maintenance. 

This  is  largely  the  result  of  increased  wages  and 
taxes,  and  apparently  the  end  of  these  increases  has 
not  yet  been  reached.  Wages  and  taxes  are  not  the 
only  cause,  for  the  railroad  company,  by  the  increase 
in  its  efficient  operation,  which  is  shown  in  heavier 
trainloads  and  by  public  requirements,  is  compelled 
to  have  a  higher  standard  for  road-bed,  equipment, 
stations,  signaling,  etc.,  and  pay  the  cost  of  new  capi- 
tal, labor,  and  materials  to  produce  them.  With  these 
demands  all  railroads  are  pleased  to  comply,  but  we 
cannot  ignore  the  result  that  it  costs  more. 

We  are,  further,  under  governmental  supervision 
and  regulation,  required  to  observe  extra-crew  laws, 
laws  for  grade-crossing  abolition,  which  in  some  States 


87 


is  exclusively  at  the  expense  of  the  railroads,  com- 
pensation acts,  etc.,  regarding  which  we  may  not  com- 
plain, as  the  public  has  the  right  to  impose  burdens 
short  of  confiscation  upon  the  railroads,  but  as  a  prac- 
tical matter  we  must  realize  that  eventually  outgo 
must  be  governed  by  income. 

The  estimated  annual  cost  to  our  company  for  three 
States  of  the  extra-crew  laws  alone  amounts  to  $756,- 
000  per  annum,  for  which  no  increased  return  will 
come  to  the  company.  In  the  six  and  one-half  years 
ending  December  31,  1912,  our  company  paid  over  $10,- 
000,000  to  comply  with  the  new  regulations,  Federal 
and  State.— Samuel  Rea:  Letter  to  Philadelphia 
Ledger,  May  9,  1913. 

What  is  to  be  the  Answer? 

Suppose  organized  railway  labor  makes  a  further  de- 
mand for  increased  wages,  and  that  the  railroads  accede 
to  this  demand.  The  increased  wage  adds  to  the  ex- 
pense of  operation  and  reduces  net  revenue.  The 
railroad  applies  to  the  Interstate  Commerce  Commis- 
sion for  leave  to  advance  its  rates  on  this  account. 
What  now  is  to  be  the  answer  of  the  Commission? 

The  railway  rate  is  paid  by  the  whole  body  of  the 
public.  If,  therefore,  this  increase  in  wage  was  un- 
justifiable, and  if  on  that  account  an  increase  in  rate 
is  allowed,  it  results  that  the  general  public,  includ- 
ing all  other  forms  of  labor,  is  required  to  pay  what 
is  unreasonable.  Must  not,  therefore,  the  Government 
be  satisfied,  not  only  that  the  added  wages  are  paid 
by  the  railroads,  but  that  they  are  necessarily  and 
properly  paid?  And  is  not  the  railroad  thus  placed 
in  a  most  unfortunate  and  embarrassing  dilemma? — 
Charles  A.  Prouty:  The  Commission  Above  the  Courts. 
Address  before  the  Traffic  Club,  Pittsburgh,  March, 
1912. 


Terminal  Facilities 

The  ability  of  the  railroads  to  render  service  is  ab- 
solutely dependent  upon  the  matter  of  terminal  facili- 
ties; and  those  are  conditioned,  not  upon  the  length 
of  the  yards,  but  the  number  of  tracks  and  the  capac- 
ity of  the  cars. 

For  instance,  if  you  have  a  hundred  cars  on  a  lim- 
ited number  of  tracks,  and  you  want  to  pick  out  any 
twenty  cars  to  move  out  somewhere,  it  is  necessary 
in  practice  to  move  virtually  the  entire  hundred;  but 
if  you  have  the  total  amount  of  freight  distributed 
among  fewer  cars  of  larger  capacity,  or  have  the  hun- 
dred cars  distributed  over  a  greater  number  of  tracks, 
there  is  a  proportionate  reduction  of  the  number  of 
cars  that  will  have  to  be  moved  in  order  to  pick  out 
the  twenty. — E.  H.  Harriman:  The  Railroads  and  the 
'People.  Independent,  March  28,  1907. 

Many  Costly  Improvements 

The  railroads  are  in  crying  need  of  more  adequate 
terminal  facilities.  For  the  greater  safety  of  the  trav- 
eling public,  wooden  passenger  cars  soon  must  be  rele- 
gated for  steel.  The  capacity  of  our  freight  equip- 
ment must  also  be  increased,  to  produce  a  lower  unit 
cost  of  transportation.  Equipment  must  be  recon- 
structed, or  substantially  strengthened,  to  sustain  the 
heavier  load  and  the  increased  strain  of  the  ponderous 
locomotives  that  are  now  displacing  the  eight-wheelers 
of  yesterday.  This,  in  turn,  entails  heavier  rail,  more 
substantial  ballast,  more  and  better  ties,  stronger 
bridges,  larger  round-houses  and  turn-tables,  new  ma- 
chinery throughout  the  shops,  reduction  of  grades, 
double-tracking  in  places,  etc.,  etc. — B.  A.  Worthing- 
ton:  The  Railroad  Question. 


Whole  Railway  System  Behind  Requirements 

This  is  written  in  December,  1908.  This  otherwise 
unimportant  fact  is  mentioned  because  to  raise  the 
question  of  the  adequacy  of  our  railway  system  at  this 
time  seems  to  smack  of  irony.  With  from  300,000  to 
500,000  freight  cars  standing  idle  during  the  past 
twelve  months,  the  system  would  seem  to  be  rather 
overloaded  with  adequacy.  But  how  short  are  our 
memories !  We  should  not  forget  that  during  the  two 
years  preceding  the  panic  of  1907  our  railway  freight 
system  literally  broke  down  under  the  enormous  loads 
of  freight  offered  it.  Or,  if  you  wish  your  memories 
refreshed,  turn  to  pages  16,  17,  18  of  the  Report  of  the 
Interstate  Commerce  Commission  for  1906,  wherein 
you  will  find  it  stated  as  a  fact  by  the  highest  author- 
ity, that  "a  car  famine  prevails  which  brings  distress 
in  almost  every  section  and  in  some  localities  amounts 
to  a  calamity."  Likewise,  that  in  the  Northwest  farm- 
ers could  not  ship  their  grain;  that  in  the  Southwest 
and  trans-Missouri  region  "tens  of  thousands  of  live 
animals  are  denied  movement  to  the  consuming  mar- 
kets," "while  throughout  the  Middle  West  and  Atlantic 
seaboard  the  shortage  of  cars  for  manufactured  ar- 
ticles and  miscellaneous  merchandise  has  become  a 
matter  of  serious  concern." — G.  A.  RanJcin:  An  Ameri- 
can Transportation  System. 

Intelligence  and  Co-operation 

It  is  a  favorite  theme  with  a  certain  class  of  poli- 
ticians to  tell  of  the  fabulous  profits  of  railroads. 
They  do  not  tell  of  the  fortunes  that  have  been  lost  in 
railroads — of  the  frequent  reorganizations,  nor  of  the 
wiping  out  of  capital  actually  invested.  Because  we 
are  a  hopeful  nation,  and  because  there  Is  always  a 


fresh  crop  of  investors  coming  along,  there  is  always 
new  money  to  be  found  to  re-finance  an  old  property 
or  to  float  a  new  one;  but  there  has  been  a  marked 
checking  of  the  enthusiasm  in  this  direction. 

Few  people,  apart  from  those  engaged  in  finance, 
comprehend  the  constant  requirement  of  railroads  for 
cash  for  development  work.  The  needs  of  this  coun- 
try in  normal  years  are  not  far  from  five  hundred 
millions  per  year.  Now,  this  money  must  be  drawn 
from  the  investor — the  banker,  the  trustee,  the  in- 
surance company,  and  the  savings  bank — by  the  issu- 
ance of  securities,  backed  by  a  valid  promise  of  re- 
payment of  the  principal  and  a  fair  rate  of  interest  on 
the  investment.  The  railway  cannot  sell  securities — 
that  is  to  say,  borrow  money — without  credit;  it  has 
no  credit  unless  its  operations  show  a  fair  profit;  it 
cannot  show  a  fair  profit  if  starved  and  strangulated 
by  legislation.  And  who  suffers  most?  The  public, 
whose  servants  the  legislatures  and  the  commissions 
are.  In  this  endless  chain  of  circumstance,  what  is 
the  answer?  To  my  mind,  more  intelligence  and  bet- 
ter co-operation. — F.  A.  Delano,  before  Convention  of 
Commercial  Associations,  State  of  Michigan,  Detroit, 
April  17,  1912. 

i 
Public  Confidence 

In  the  matter  of  improvements  the  railroads  of  the 
country,  almost  without  exception,  have  been  pursuing 
a  hand-to-mouth  policy  which  has  proved  costly  to 
themselves  and  irritating  to  the  public — costly  to 
themselves  because,  before  improvements  necessary 
to  relieve  existing  conditions  have  been  completed 
their  capacity  has  been  exceeded  by  the  growth  of 
traffic ;  irritating  to  the  public  because  at  no  time  in 
recent  years  has  the  public  been  able  to  get  free  from 


91 


the  delays  and  annoyances  of  a  continual  state  of 
congestion.  The  result  is  that  today,  when  the  rail- 
roads are  confronted  with  conditions  requiring  more 
comprehensive  improvements  than  ever  before  in  their 
history,  and  consequently  greater  utilization  of  money 
than  ever  before,  they  are  confronted  also  with  a 
state  of  public  mind  extremely  hostile  to  themselves; 
so  that  the  raising  of  money  to  provide  facilities  so 
urgently  needed  is,  under  present  conditions,  well 
nigh  impossible,  although  many  of  the  corporations 
have  sought  to  do  so  at  the  risk  of  almost  imperilling 
their  credit. — Theodore  P.  Shonts,  at  annual  banquet 
of  the  Iowa  Society,  February  15,  1907. 

Unfair  Attacks  on  the  Railroads 

For  a  number  of  years  the  railroads  have  been  sub- 
jected to  a  great  concerted  attack.  The  skill  of  the 
employees,  the  character  of  the  officers,  and  the 
honesty  of  the  capitalization  have  alike  been  im- 
pugned. Back  of  all  stands  the  sinister  threat  to  seg- 
regate from  all  other  forms  of  investment  the  in- 
vestment in  railroad  securities,  to  assert  over  such  in- 
vestment a  high-handed  control,  assuming  no  responsi- 
bilities for  losses,  but  limiting  any  possible  gains  to 
a  savings-bank  rate  of  interest.  Should  this  effort  be 
successful,  it  is  certain  to  degrade  the  employees,  to 
drive  out  the  capable  officers,  and  to  lead  to  the  re- 
fusal of  investors  to  make  new  contributions  to  capi- 
tal. If  such  an  effect  were  brought  about,  the  conse- 
quences to  the  community  would  be  more  far-reaching 
than  one  likes  to  contemplate. — L.  F.  Loree:  Address 
at  annual  dinner  of  the  Alumni  Association  of  Rutgers 
College,  June,  1908. 


92 


The  Legislative  Handicaps 

No  improvement  work  of  moment  is  now  under  way. 
The  roads  cannot  much  more  than  merely  "mark 
time."  Neither  the  courage  nor  the  money  necessary 
for  railroad  construction  is  to  be  found  under  exist- 
ing conditions.  What  can  be  reasonably  expected 
when  we  say  to  a  body  of  men  that  we  want  them 
to  go  right  ahead  with  their  construction  of  new  rail- 
roads and  additional  facilities,  so  as  to  be  prepared 
for  any  increase  of  traffic  which  may  be  offered  for 
movement,  but,  at  the  same  time,  we  put  them  on  no- 
tice that  after  their  money  has  gone  into  property 
which  they  cannot  remove  and  cannot  cease  to  operate 
after  its  creation,  some  or  all  of  the  40  State  railroad 
commissions,  more  than  40  State  legislatures,  the 
Interstate  Commerce  Commission,  and  the  National 
Congress  will  decide  what  rates  shall  prevail ;  what 
practices  shall  obtain  in  more  or  less  minute  detail; 
how  many  men  shall  be  employed  on  each  train;  how 
old  or  young  these  men  shall  be,  and  how  many  hours 
they  shall  work,  if  at  all ;  upon  what  plans  new  sta- 
tions shall  be  built,  as  well  as  when  and  where;  how 
fast  stock  trains  shall  move  over  the  rails ;  what  sort 
of  headlights  shall  be  bought;  what  sort  of  signals 
shall  be  installed,  and  when ;  how  many  new  securi- 
ties may  be  issued  and  sold,  if  purchasers  can  be 
found,  and,  failing  to  get  authority  for  an  issue  of 
securities  for  the  purchase,  let  us  say,  of  equipment; 
or,  failing  to  induce  the  owner  of  money  to  exchange 
his  money  for  such  securities,  penalties  will  be  en- 
forced for  failure  to  furnish  any  shipper  whatever 
cars  he  may  want  at  any  time. — B.  L.  Winchell:  Ad- 
dress before  Commercial  Club  of  Council  Bluffs,  Iowa, 
March  18,  1909. 


93' 


Greater  Movement  of  Cars 

The  public  assumes  that  if  enough  cars  are  pro- 
vided they  can  be  moved  on  schedule  time  from  point 
of  origin  to  destination,  wherever  these  may  be.  This 
is  not  the  real  trouble.  What  is  really  needed  is  the 
greater  movement  of  cars.  The  average  movement 
of  a  freight  car  is  about  24  miles,  or  two  hours,  per 
day.  Delays  in  loading  and  unloading  by  shippers 
are  partly  responsible,  but  much  of  the  lost  time  is 
consumed  in  getting  into,  out  of,  or  through  terminal 
points  where  there  is  not  room  to  handle  the  cars. 
More  cars  intensify  instead  of  reducing  the  trouble. 
No  other  business  could  endure  the  loss  of  the  use  of 
its  machine  plant  for  twenty-two  hours  out  of  twenty- 
four.  One  thousand  cars  will  cover  nearly  eight 
miles  of  track.  Each  car  must  be  switched,  loaded, 
or  unloaded,  or  all  three.  This  multiplies  the  track- 
age requirement. — James  J.  Hill:  Address,  The  Coun- 
try's Need  of  Greater  Railway  Facilities  and  Termi- 
nals. 

New  Cars  Cost  More 

Steel  cars  are  a  good  illustration  of  this  kind  of 
expense.  They  are  coming  into  general  use,  and  it  has 
been  proposed  to  make  their  purchase  and  employ- 
ment compulsory  even  before  their  benefits  have  been 
fully  proved.  To  buy  them  is  a  big  expense,  but  that 
is  only  the  beginning.  A  train  made  up  of  them  is 
sixty-five  per  cent  heavier  than  one  composed  of  old- 
style  cars.  More  trains  must  be  run  to  render  the 
same  service.  Tracks  and  bridges  must  be  strength- 
ened.— James  J.  Hill:  Address,  The  Country's  Need  of 
Greater  Raihvay  Facilities  and  Terminals. 


•94 


Railway  Management 

The  public  is  interested  not  only  in  rates,  but  in 
service  as  well.  It  demands  that  service  shall  be  ade- 
quate. *  *  *  It  requires  that  proper  provision  be 
made  for  the  health,  comfort,  and  convenience  of  pas- 
sengers, and  for  the  humane  care  of  live  freight. 
*  *  *  It  is  in  response  to  these  demands  that  steel 
coaches  are  being  introduced,  and  all-steel  passenger 
trains  are  becoming  increasingly  common  upon  our 
most  progressive  lines;  that  block-signal  systems  are 
gradually  being  extended;  that  rules  governing  the 
operation  of  trains  are  being  more  strictly  enforced; 
that  temperate  habits  are  being  required  of  employees ; 
that  hours  of  labor  for  despatchers  and  trainmen  are 
being  reduced ;  and  that  full  crews  are  being  required 
on  all  trains.  Congress  has  required  that  all  equip- 
ment used  in  connection  with  interstate  commerce 
shall  be  equipped  with  power  brakes,  automatic  coup- 
ling devices,  and  suitable  grab-irons ;  that  proper  care 
be  observed  in  the  handling  of  explosives;  and  that 
locomotive  boilers  shall  be  rigidly  inspected. 

These  legitimate  demands  of  the  public  create  a 
strong  tendency  toward  increasing  the  expense  of  rail- 
road operation.  We  find,  therefore,  that  the  railroad 
manager  of  today  is  strictly  limited  in  the  exercise  of 
discretion ;  that  there  are  limits  beyond  which  he  may 
not  increase  earnings  through  an  increase  in  rates ;  and 
that  expenses  are  becoming  constantly  greater — Fred. 
Wilbur  Powell:  Les  Chemins  de  fer  Amtiricains,  Revue 
ticonomique  Internationale,  November,  1912. 

Immense  Outlay  of  Money 

It  is  urgently  necessary  at  the  present  time,  in  order 
to  relieve  the  existing  congestion  of  business  and  to 


95 


do  away  with  the  paralysis  which  threatens  our  ex- 
panding industries,  because  of  limited  and  inefficient 
means  of  distribution,  that  our  railway  facilities 
should  be  so  increased  as  to  meet  the  imperative  de- 
mands of  our  internal  commerce.  The  want  can  be 
met  only  by  private  capital,  and  the  vast  expenditure 
necessary  for  such  purpose  will  not  be  incurred  unless 
private  capital  is  afforded  reasonable  incentive  and 
protection.  It  is  therefore  a  prime  necessity  to  allow 
investments  in  railway  properties  to  earn  a  liberal 
return,  a  return  sufficiently  liberal  to  cover  all  risks. 
We  cannot  get  an  improved  service  unless  the  carriers 
of  the  country  can  sell  their  securities ;  and  therefore 
nothing  should  be  done  unwarrantedly  to  impair  their 
credit  nor  to  decrease  the  value  of  their  outstanding 
obligations. 

I  emphatically  believe  that  positive  restraint  should 
be  imposed  upon  railway  corporations,  and  that  they 
should  be  required  to  meet  positive  obligations  in  the 
interest  of  the  general  public.  I  no  less  emphatically 
believe  that  in  thus  regulating  and  controlling  the 
affairs  of  the  railways  it  is  necessary  to  recognize  the 
'  need  of  an  immense  outlay  of  money  from  private 
sources,  and  the  certainty  that  this  will  not  be  met 
without  the  assurance  of  sufficient  reward  to  induce 
the  necessary  investment.  It  is  plainly  inadvisable 
for  the  Government  to  undertake  to  direct  the  physical 
operation  of  the  railways,  save  in  wholly  exceptional 
cases;  and  the  supervision  and  control  it  exercises 
should  be  both  entirely  adequate  to  secure  its  ends 
and  yet  no  more  harassing  than  is  necessary  to  secure 
these  ends. — Theodore  Roosevelt:  American  Review  of 
Reviews,  June,  1907. 


Better  Transportation 

The  great  need  of  the  hour,  from  the  standpoint  of 
the  general  public — of  the  producer,  consumer,  and 
shipper  alike — is  the  need  for  better  transportation 
facilities,  for  additional  tracks,  additional  terminals, 
and  improvements  in  the  actual  handling  of  the  rail- 
roads; and  all  this  with  the  least  possible  delay. 
Ample,  safe,  and  rapid  transportation  facilities  are 
even  more  necessary  than  cheap  transportation.  The 
prime  need  is  for  the  investment  of  money  which  will 
provide  better  terminal  facilities,  additional  tracks, 
and  a  greater  number  of  cars  and  locomotives,  while 
at  the  same  time  securing,  if  possible,  better  wages 
and  shorter  hours  for  the  employees.  There  must  be 
just  and  reasonable  regulation  of  rates,  but  any 
arbitrary  and  unthinking  movement  to  cut  them  down 
may  be  equivalent  to  putting  a  complete  stop  to  the 
effort  to  provide  better  transportation. — Theodore 
Roosevelt:  American  Review  of  Reviews,  June,  1907. 

A  Reasonable  Return 

Resolved,  That  the  Chamber  of  Commerce  of  the 
State  of  New  York,  in  the  interest  of  shippers  and  of 
the  well  being  of  the  country  as  a  whole,  urges  upon 
the  Interstate  Commerce  Commission  and  ajl  State 
railway  commissions  the  importance,  for  the  future, 
of  so  carefully  weighing  and  considering  the  effect  to 
be  produced  upon  the  railways  in  the  making  of  any 
necessary  readjustments  of  freight  rates  that  the 
same  may  be  accomplished  without  further  curtailing 
the  total  revenue  of  the  railways,  upon  which  their 
borrowing  credit  depends,  bearing  in  mind,  as  stated 
by  the  Railroad  Securities  Commission,  that  "a  reason- 
able return  is  one  which  under  honest  accounting  and 
responsible  management  will  attract  the  amount  of 


07 


Investors'  money  needed  for  the  development  of  our 
railroad  facilities,"  and  also  bearing  in  mind  that  the 
development  and  prosperity  of  the  railroads  means  de- 
velopment and  prosperity  of  the  country. — Chamber  of 
Commerce  of  the  State  of  New  Yor7c,  Railroad  Rate* 
and  Railroad  Credit.  Report  adopted  April  4,  1912. 

Cannot  Force  Private  Capital 

While  we  can  provide  by  legislation  the  sort  of 
cars  which  a  railroad  shall  use  and  the  rates  which  it 
shall  impose,  we  cannot  by  legislation  force  one  single 
dollar  of  private  capital  into  railway  investment 
against  its  will. — Charles  A.  Pronty,  CJiairman  of  the 
Interstate  Commerce  Commission,  YaJe  University, 
September  13,  1912. 

Loading  and  Unloading  Facilities 

Up  to  the  present  time  the  terminal  facilities  of  the 
principal  carriers  have  kept  pace  approximately  with 
the  growth  of  traffic.  The  loading  and  unloading  facili- 
ties of  shippers  and  consignees  have  fallen  far  short 
of  doing  so.  The  explanation  of  shipper  and  consignee 
for  this  situation  in  all  large  business  centers  is  the 
expense  involved.  The  railways  are  today  face  to  face 
with  this  same  insurmountable  obstacle.  The  prop- 
erty purchased  with  wise  foresight  years  ago  is  being 
utilized  to  the  maximum  extent,  and  the  value  given 
to  the  adjacent  property  through  the  transportation 
thus  afforded  makes  prohibitive  any  further  purchases 
on  an  extended  scale  in  the  congested  district,  except 
for  union  passenger  facilities  or  some  similar  special 
purpose,  where  the  expense  can  be  divided  among  a 
number  of  companies. —  Abstract  from  statement  of 
E.  D.  Sewall  before  tlie  Committee  on  Interstate  and 
Foreign  Commerce,  United  States  House  of  Represen- 
tatives, February  6,  1913. 


"WHAT  THE  TRAFFIC  WILL  BEAR." 


An  Unfortunate  Expression 

It  has  always  seemed  to  me  that  the  expression, 
"What  the  traffic  will  bear,"  has  been  a  most  unfor- 
tunate one  for  all  of  us.  If  we  would  say,  "What 
the  traffic  can  afford,"  it  would  represent  a  great  deal 
more  than  we  get  and  would  sound  much  pleasanter. 
The  fact  is,  we  are  all  trying  to  make  rates  on  our 
respective  lines  that  will  "move  the  business,"  and  I 
think  I  could  not  express  it  in  a  few  words  better 
than  that.  Probably  hardly  any  general  freight  agent 
knows  what  the  capital  of  his  company  is,  but  he  is 
anxious  to  move  business  to,  from,  or  over  the  line 
he  serves,  and  to  build  up  its  industries.  So  long  as 
the  Sherman  Anti-Trust  Law  is  in  effect  he  is  anx- 
ious to  move  it,  and  the  shippers  are  pressing  him 
to  move  it,  as  against  some  competition  somewhere ; 
so  that,  while  we  now  have  uniformity  of  rates,  we 
still  have  competition  in  service  and  real  competition 
in  the  matter  of  fostering  business  in  competitivo 
Communities  and  districts. — Frank  Trumbull:  State- 
ment 'before  Federal  Railroad  Securities  Commission, 
New  York,  December  22,  1910. 

Tendency  of  Rates  Downward 

Our  experience  is  that  not  only  have  expenses  and 
taxes  and  other  expense  outlays  been  increased,  but 
the  tendency  of  the  rates  themselves  has  until  recently 
been  downward,  so  that  the  present  rates  do  not  pro- 
duce a  fair  return  upon  the  capital  employed.  This 


return  on  the  capital  employed  solely  for  railroad  pur- 
poses has  during  the  past  ten  years  in  the  history  of 
our  company  been  continually  reduced. 

On  the  total  cash  invested  in  railroad  tracks,  equip- 
ment, and  facilities,  the  president  of  our  company 
testified  in  the  rate  hearings  in  1910  that  5.01  per 
cent  was  earned  in  the  year  1909.  In  1912  the  return 
upon  the  amount  similarly  invested  on  our  lines  east 
of  Pittsburgh  and  Erie  was  4.83  per  cent,  while  in 
1900  the  return  was  9.39  per  cent. 

Our  problem  is:  Is  this  a  fair  return,  and  can  the 
company  continue  to  render  an  effective  service  and 
raise  new  capital  for  future  growth  on  that  basis? 

We  are  sure  that  unless  this  margin  over  a  fair 
return  to  the  stockholders  is  earned,  everything  above 
bare  maintenance  of  the  property  must  be  provided 
out  of  capital  account,  and  this  in  turn  means  that 
new  capital  for  betterments  and  improvements  of  our 
facilities  and  service  will  be  exceedingly  difficult  to 
raise,  and  it  must  be  at  measurably  higher  rates  than 
have  heretofore  prevailed.  We  cannot  raise  that 
money  except  in  competition  with  other  forms  of  cor- 
porate and  private  enterprise,  and  without  public  ap- 
proval and  co-operation  in  securing  the  payment  of  a 
fair  transportation  rate  by  the  shippers. — Samuel 
Rea:  Address  at  a  meeting  of  shippers,  Boston,  Mass., 
June  12,  1913. 

The  Distribution  of  Rates 

There  is  evident  need  of  clarifying  the  general  con- 
ception of  the  meaning  of  the  phrase  "What  the  traf- 
fic will  bear,"  especially  in  view  of  the  insinuating 
use  of  the  phrase  "All  the  traffic  will  bear"  on  the 
part  of  demagogues  and  of  some  attorneys  for  the 
Interstate  Commerce  Commission.  The  best  recog- 


100 


nized  authorities  on  both  the  economics  and  the  prac- 
tice of  railroading  are  generally  agreed  that  railway 
freight  rates  should  be  fixed  according  to  what  the 
traffic  will  bear.  All  this  means,  however,  is  that 
since  freight  charges  are  virtually  a  form  of  tax  upon 
the  general  movement  of  merchandise,  and  therefore 
upon  the  commerce  of  the  nation,  this  taxation,  like 
any  other,  should  be  distributed  according  to  ability 
to  pay.  It  probably  costs  about  as  much  to  govern 
one  man  as  another ;  but  a  system  of  levying  taxation 
according  to  the  cost  of  government  is  manifestly  ab- 
surd and  unjust.  Likewise  a  system  of  levying  rail- 
road freight  charges  according  to  the  cost  of  the  serv- 
ice rendered  would  act  as  a  restraint  to  trade. 

Approxi- 

rommnriitv  Ton  mileage,          Rev.  per          mate 

Commodity.  carload  lots.  ton-mile,      value  per 

ton. 

Grain    6,928,262,616  0.595  $30.00 

Hay    827,579,088  0.957  22.00 

Cotton 711,041,421  1.743  300.00 

Live  stock 2,220,764,548  1 . 182  145 . 00 

Dressed  meats.....  851,025,602  0.889  195.00 

Anthracite  coah . . .  4,772,992,507  0.611  5.00 

Bituminous    coal...  14,981,599,184  0.498  3.40 

Lumber    7,937,958,258  0.727  37.00 

Of  these  principal  commodities,  the  one  bearing  the 
lowest  freight  rate  is  bituminous  coal,  which  also  has 
the  lowest  value  per  ton,  while  the  one  bearing  the 
highest  freight  rate  is  cotton,  which  also  has  the  high- 
est value  per  ton.  In  brief,  the  freight  rates,  or  taxes 
on  transportation,  are  distributed  roughly  according 
to  ability  to  pay.  It  probably  costs  no  more  to  move 
a  ton  of  anthracite  than  a  ton  of  bituminous  coal,  but 
the  higher  transportation  tax  on  anthracite  is  Just, 
not  only  because  the  higher  value  of  hard  coal  enables 


101 


it  to  pay  the  higher  tax,  but  also  because  an  even  dis- 
tribution of  this  taxation  upon  all  commodities  would 
absolutely  halt  the  movement  of  low-grade  freight, 
such  as  coal  and  lumber ;  overstiinulate  the  movement 
of  high-grade  freight,  such  as  cotton  and  live  stock, 
and  at  the  same  time  reduce  the  traffic  of  our  railroads 
to  such  an  extent  as  to  put  many  of  them  out  or  busi- 
ness.— Wall  Street  Journal,  editorial,  September  7, 
1910. 

The  Underlying  Principle 

"What  the  traffic  will  bear" — that  the  foremost  au- 
thorities on  railway  economics  in  the  country  unite 
in  declaring  the  true  measure  of  the  value  of  the 
service  rendered.  A  railroad,  for  instance,  which 
hauls  a  ton  of  cotton,  worth  $300,  a  mile,  renders  a 
service  of  greater  value  to  the  cotton  shipper  than  it 
renders  to  the  owner  of  a  coal  mine  when  it  hauls  a 
ton  of  coal,  worth  perhaps  $3,  a  corresponding  dis- 
tance. That  principle  is  well  recognized.  Last  year 
the  average  revenue  per  ton-mile  derived  by  the  rail- 
roads from  hauling  soft  coal  was  only  0.498  cents. 
For  hauling  a  ton  of  cotton  a  mile  it  was  1.743  cents. 
To  haul  the  cotton  probably  cost  the  railroad  very 
little  more  than  to  haul  the  coal,  but  the  greater  serv- 
ice rendered  the  cotton  dealer  made  it  right  and  just 
that  the  railroad  should  charge  him  more. 

That  is  the  underlying  principle  on  which  the  trans- 
portation men  claim  that  freight  rates  should  be  based. 
The  value  of  the  service  rendered,  they  say,  is  accu- 
rately measured  in  what  the  traffic  will  bear.  A  coal 
mine,  for  example,  would  be  put  out  of  business  in  a 
day  were  the  rates  applying  to  the  transportation  of 
cotton  or  of  meat  to  be  applied  to  coal.  Business 
simply  could  not  be  done  under  those  conditions. 


102 


To  charge  more  than  the  traffic  would  bear  would 
consequently  only  react  upon  the  railroads  themselves. 
Just  as  manufacturing  or  other  industrial  plants  are 
dependent  upon  the  railroads  along  the  lines  of  which 
they  are  located,  so  it  is  upon  these  very  industrial 
plants  that  the  railroads  themselves  are  dependent  for 
the  traffic  without  which  they  cannot  live.  To  charge 
rates  too  high  or  to  do  anything  else  which  will  lessen 
the  volume  of  traffic  is  exactly  in  opposition  to  the 
railroads'  own  best  interests.  What  they  want  to  see 
is  traffic  stimulated  to  the  highest  possible  point. — 
Franklin  Escher:  The  Reasonable  Basis  of  Railway 
Freight  Rates.  Harper's  Weekly,  September  24,  1910. 

A  System  in  the  Public  Interest 

The  phrase  "charging  what  the  traffic  will  bear" 
has,  for  some  not  very  obvious  reason,  undoubtedly 
acquired  an  ill  repute.  On  the  face  of  it,  it  surely 
seems  to  represent  a  principle,  not  of  extortion,  but 
of  moderation.  To  charge  what  the  traffic  can  bear 
is,  in  other  words,  not  to  charge  what  the  traffic  can- 
not bear.  *  *  *  The  real  meaning  of  the  phrase 
is  that,  within  the  limits  already  described — the  supe- 
rior limit  of  what  any  particular  traffic  can  afford  to 
pay  and  the  inferior  limit  of  what  the  railway  can 
afford  to  carry  it  for — railway  charges  for  different 
categories  of  traffic  are  fixed,  not  according  to  an  esti- 
mated cost  of  service,  but  roughly  on  the  principle  of 
equality  of  sacrifice  by  the  payer.  So  regarded,  "what 
the  traffic  will  bear"  is  a  principle,  not  of  extortion, 
but  of  equitable  concession  to  the  weaker  members  of 
the  community.  Had  railway  managers  in  the  past 
declared  that  their  principle  was  "tempering  the  wind 
to  the  shorn  lamb,"  their  descriptive  accuracy  would 
have  been  equally  great,  while  their  popularity  might 


103 


have  been  even  greater.  *  *  *  Translated  into 
railway  language,  the  principle  means  this:  the  total 
railway  revenue  is  made  up  of  rates  which,  in  the 
case  of  traffic  unable  to  bear  a  high  rate,  are  so  low 
as  to  cover  hardly  more  than  actual  out-of-pocket  ex- 
penses; which,  in  the  case  of  medium  class  traffic, 
cover  both  out-of-pocket  expenses  and  a  proportionate 
part  of  the  unapportioned  cost;  and  which,  finally,  in 
the  case  of  high-class  traffic,  after  covering  that  traf- 
fic's own  out-of-pocket  expenses,  leaves  a  large  and 
disproportionate  surplus  available  as  a  contribution 
towards  the  unapportioned  expenses  of  the  low-class 
traffic,  which  such  traffic  itself  could  not  afford  to  bear. 
This,  in  principle  and  in  outline,  is  the  system  of 
charging  what  the  traffic  can  bear.  It  is  the  system 
which — the  point  must  be  reiterated — is,  always  has 
been,  and,  as  far  as  we  can  see,  always  must  be 
adopted  on  all  railways,  whether  they  be  State  enter- 
prises or  private  undertakings.  It  is  a  system  *  *  * 
in  the  interest  of  the  public,  because  traffic  is  thereby 
made  possible  which  could  not  come  into  existence  at 
all  if  each  item  of  traffic  was  required  to  bear  not 
only  its  own  direct  expenses,  but  its  full  share  of  all 
the  standing  charges. — W.  M.  Acworth:  The  Elements 
of  Railway  Economics. 

The  Evolution  of  Rates 

To  decide  between  all  these  varied  interests,  the 
railroads  of  the  nation  have  employed,  on  a  conserva- 
tive estimate,  over  5,000  experts  dealing  with  traffic 
and  rate  adjustments.  Each  railroad  usually  has  one 
vice-president  in  charge  of  rate  affairs,  a  traffic  man- 
ager, several  general  freight  agents  and  assistants,  and 
all  the  way  from  ten  to  one  hundred  highly  expert 
jrate-clerks — whose  brains,  through  years  of  training, 


104 


have  become  perfect  compendiums  of  rate  and  traffic 
statistics.  Upon  this  body  of  men  rests  the  highly 
difficult  task  of  building  the  rate  structure  of  the 
country. 

In  the  early  days  of  the  railroad  the  rate  was  fixed 
exactly  as  it  was  on  a  turnpike — a  regular  toll :  for  so 
many  miles,  so  much  of  a  charge.  If  five  miles  cost 
ten  cents,  then  ten  miles  cost  twenty  cents,  twenty 
miles  forty  cents,  and  so  on — a  simple  method  of  dis- 
tance tariffs.  But  the  growth  of  competing  railroads 
and  the  desire  to  build  up  distant  business  led  to  the 
adoption  of  a  wholly  new  principle,  that  of  "charging 
what  the  traffic  will  bear" — in  other  words,  getting  all 
the  money  possible  out  of  every  kind  of  goods  trans- 
ported. Supposing  under  the  old  system  the  rate  was 
five  cents  for  carrying  a  ton  one  mile.  A  man  who 
was  shipping  silk,  or  shoes,  or  hats,  or  other  high- 
priced  goods  could  afford  to  send  them  a  long  distance, 
because  a  ton  of  hats  would  be  so  valuable  that  the 
freight  rate  would  count  for  next  to  nothing  in  the 
selling  price.  On  the  other  hand,  the  man  who  was 
making  brick,  which  are  both  heavy  and  cheap,  could 
not  afford  to  ship  his  product  at  all,  because  five  cents 
a  ton  a  mile  would  soon  eat  up  the  entire  profit.  Con- 
sequently the  brick  man  went  to  the  railroad  owner 
and  said: 

"See  here,  you  give  me  one  cent  a  ton  a  mile  and  I 
can  give  you  a  great  deal  of  business.  You  have  got 
your  roadbed  and  your  investment;  you  have  got  to 
run  your  trains  anyway,  and  one  cent  a  ton  a  mile 
will  pay  you  a  profit  on  your  actual  running  expenses." 

The  railroad  man  saw  that  while  hats  would  bear 
a  charge  of  five  cents  a  ton,  brick  would  bear  only  one 
cent.  And  the  fundamental  principle  of  all  railroad- 
ing is  that  "whatever  happens,  traffic  must  move." 
Well,  the  railroad  soon  found  that  coal,  wheat,  build- 


100 


ing  stone,  and  other  heavy,  cheap  commodities,  would 
move,  and  move  long  distances,  if  the  rate  was 
low  enough.  More  and  more  changes  were  therefore 
made  in  the  direction  of  "charging  what  the  traffic 
will  bear." — Ray  Stannard  Baker:  The  Railroad  Rate. 
McClure's  Magazine,  November,  1905. 

What  the  Service  is  Worth 

What  the  service  is  worth — there  we  have  the  basis 
on  which  freight  rates  are  really  fixed.  Not  what  the 
railroad  would  like  to  get  or  what  the  capitalization 
makes  it  necessary  to  get  in  order  to  pay  dividends, 
but  simply  what  is  the  money  equivalent  of  the  service 
rendered.  Selling  railroad  transportation  is  really  no 
different  from  selling  anything  else.  Imagine  a  mer- 
chant, about  to  fix  a  price  on  a  lot  of  goods,  saying  to 
himself:  "Here,  I  and  my  associates  have  capitalized 
this  business  at  more  than  it  is  worth,  and  now  we 
4have  got  to  make  enough  money  to  keep  up  our  divi- 
dend. I'll  just  put  such  a  price  on  these  goods  as  will 
allow  us  to  make  the  amount  of  money  we  need." 
Would  that  be  likely  to  accomplish  the  desired  result? 
Hardly.  What  does  the  consumer  care  about  the 
amount  of  money  the  merchant  considers  it  necessary 
to  make?  The  goods,  presumably,  have  a  certain 
value,  and  that  value,  or  something  approximating  it, 
is  all  the  purchaser  is  willing  to  pay.  Let  the  mer- 
chant arbitrarily  mark  up  the  price,  and  one  of  two 
things  will  surely  happen — the  purchaser  will  either  go 
somewhere  else  or  will  refuse  to  buy  entirely. — Frank- 
lin Escher:  The  Delicate  Question  of  Railway  Credit. 
North  American  Review,  February,  1913. 


RATES  AND  RATE  MAKING. 


Present  Rate  Very  Small 

The  present  freight  rate  is  very  small.  How  small 
it  is  can  be  better  understood  when  one  realizes  that 
for  25  cents,  what  it  costs  according  to  the  United 
States  Department  of  Agriculture  for  the  farmer  to 
move  a  one-ton  load  by  wagon  one  mile,  the  Northern 
Pacific  Railway,  at  its  average  rate  last  year,  will 
move  the  one-ton  load  27.2  miles.  For  the  cost  of  a 
two-cent  postage  stamp  it  will  move  a  ton  about  two 
and  a  quarter  miles.  For  the  cost  of  ten  pounds  of 
ten-penny  nails  it  will  move  a  ton  44  miles;  for  the 
price  of  a  No.  2  Ames  shovel,  166  miles ;  for  the  money 
it  takes  to  buy  a  good  milk  pail,  138  miles ;  and  for  the 
price  of  an  ordinary  lantern  globe,  16  miles— Howard 
Elliott:  How  the  Railroads  Help  the  Farmer.  Leslie's 
Weekly,  April  3,  1913. 

Rates  for  Grain  and  Other  Produce 

There  has  been  a  cry  against  the  railroads  for  their 
high  freight  rates.  But  close  examination  reveals  the 
fact  that  the  great  economies  of  modern  transportation 
have  made  possible  the  carrying  of  grain  and  other 
produce  at  ridiculously  low  cost.  For  instance,  it 
costs  the  farmer  on  an  average  forty  cents  per  ton 
mile  to  haul  his  corn  to  the  railroad.  The  railroad, 
on  the  other  hand,  carries  it  at  an  average  rate  of 
approximately  three-quarters  of  a  cent  per  mile.  More 
efficient  means  of  getting  the  grain  from  farm  to 
railroad  should  be  devised.  The  auto-truck  should  find 
106 


107 


its  way  to  the  farmer.— D.  Miller:  America's  Greatest 
Crop.    Harper's  Weekly,  December  28,  1912. 

What  a  Slight  Increase  Would  Do 

Can  the  railroads  meet  this  serious  situation  with 
which  they  are  confronted?  Yes,  if  allowed  to  charge 
a  fair  compensation  for  their  services.  The  railroads 
now  receive  on  an  average  per  mile  7%  mills  for 
hauling  a  ton  of  freight  and  less  than  2  cents  for 
carrying  a  passenger.  If  this  average  compensation 
could  be  increased  even  one  mill,  or  the  equivalent  of 
the  price  of  a  postage  stamp  for  twenty  miles*  service, 
it  would  extricate  them  from  all  further  trouble  and 
anxiety.  It  is  scarcely  conceivable  that  such  a  'slight 
advance  would  injuriously  affect  any  trade,  industry, 
or  person,  yet  it  would  be  the  means  of  conferring 
untold  benefits  upon  the  entire  business  of  the  country. 
— Benjamin  F.  Busli,  before  the  Economic  Club,  New 
York,  April  29,  1913. 

American  Rates  the  Lowest  ^ 

The  freight  rates  in  the  United  States  are,  in  gen- 
eral terms,  only  five-eighths  of  those  charged  on  the 
continent  of  Europe  and  a  little  less  than  one-half  of 
those  which  prevail  in  Great  Britain.  But  it  will  be 
seen  that  in  reality  our  charges  are  relatively  even 
lower  than  stated  by  the  above  figures,  when  we  con- 
sider that  in  the  passenger  service  vastly  superior 
accommodations  are  furnished  in  the  way  of  heating, 
lighting,  ventilation,  ice-water,  lavatories,  and  free 
carriage  of  baggage ;  and  that  in  the  transportation  of 
merchandise  greater  advantages  are  afforded  by  run- 
ning freight  trains  at  higher  speed,  making  longer 
hauls  without  breaking  bulk,  and  allowing  cars  to 
remain  a  greater  length  of  time  in  the  hands  of  ship- 


108 


pers  for  loading  and  unloading,  there  being  usually 
employed  from  the  latter  cause  from  20  to  25  per  cent 
more  cars  than  would  be  necessary  for  the  strict  haul- 
ing of  the  traffic. 

In  this  connection  we  must  also  recollect  that  the 
cost  of  fuel,  wages,  and  all  construction  material  is 
considerably  higher  here  than  in  Europe,  while  the 
population  from  which  the  railways  derive  their  sup- 
port is  much  more  sparse,  the  United  States  having 
166,000  miles  of  railway  with  a  population  of  63,- 
000,000*  while  Europe  has  only  135,000  miles  with  a 
population  of  335,000,000. — Horace  Porter:  Railway 
Rates.  North  American  Review,  December,  1891. 

The  Economic  Principles 

The  economic  principles  involved  in  fixing  railroad 
charges  are  not  radically  different  from  those  involved 
in  fixing  the  price  of  bread ;  it  is  only  that  their  opera- 
tion is  slower  and  more  obscure,  and  that  the  public 
has  learned  the  lesson  less  completely.  There  was  a 
time  when  it  was  thought  necessary  to  have  the  public 
authorities  fix  the  price  of  bread.  People  feared  that, 
if  matters  were  left  to  themselves,  the  sellers  would 
have  a  monopoly,  and  take  every  advantage  of  the 
needy  buyers.  But,  as  time  went  on,  it  was  found 
that  such  laws  did  more  harm  than  good.  If  the 
price  was  fixed  too  high,  it  was  useless ;  if  it  was  fixed 
too  low,  the  supply  of  bread  fell  short  of  the  demand, 
and  while  some  people  got  their  bread  cheap,  others 
got  none  at  all.  The  suffering  of  the  latter  class  was 
greater  than  the  advantage  to  the  former.  A  new 
system  gradually  superseded  the  old.  Sellers  were 
allowed  to  get  what  price  they  could,  buyers  to  pay 
what  price  they  would.  In  that  way,  and  in  that  way 
only,  was  there  an  adjustment  of  quantity  of  service 


109 


to  public  demand. — Arthur  T.  Hadley:  Railroad  Prob- 
lems of  the  Immediate  Future.  Atlantic  Monthly, 
March,  1891. 

Rates  Not  Based  on  Value  of  Railroad 

It  is  perfectly  obvious  that  the  railroad  rates  of  this 
country  are  not  based  on  the  value  of  railroad  prop- 
erty. No  railroad  company  has  ever  undertaken  to 
base  rates  on  the  value  of  its  property,  and  no  rail- 
road man  has  ever  attempted  to  make  rates  according 
to  the  value  of  the  railroad.  *  *  *  Rates  must  of 
necessity  be  the  same  on  all  competing  railroads ;  and 
yet  we  know  that  the  value  of  such  railroads  varies 
greatly.  If  the  more  valuable  should  raise  its  rates 
because  of  its  investment  or  value,  it  would  simply 
drive  the  competitive  business  to  the  cheaper  line. 
*  *  * 

In  short,  it  is  just  as  plain  that  railroad  rates  are  not 
and  never  have  been  based  upon  the  value  of  railroad 
property  as  that  they  are  not  and  never  have  been  based 
upon  the  stock  and  bonds  outstanding.  Nor  do  I  un- 
derstand that  Congress  has  ever  authorized  or  re- 
quired the  Interstate  Commerce  Commission  to  base 
rates  on  the  value  of  railroad  property. — R.  S.  Lovett, 
Statement  before  Railroad  Securities  Commission,  De- 
cember 21,  1910. 

Variations  in  Rates 

While  the  Supreme  Court  has  undertaken  to  point 
out  "certain  elements"  to  be  considered  in  determining 
the  reasonableness  of  an  entire  system  of  rates,  it  has 
not  named  any  as  shedding  light  upon  the  reasonable- 
ness of  a  rate  on  a  single  commodity,  like  lumber.  It 
is  evident  that  such  elements  are  widely  variant  in  the 


110 


two  cases.  Where  an  entire  system  of  rates  is  in- 
volved, the  principal,  if  not  the  only,  question  is, 
whether  the  revenue  yield  by  the  rates  on  all  traffic  is 
a  fair  return  on  the  value  of  that  which  is  "employed 
for  the  public  convenience" — a  question,  the  determina- 
tion of  which,  as  we  have  shown,  can  have  only  a  very 
remote,  if  any,  practical  bearing  on  the  reasonableness 
of  a  rate  on  a  single  article  of  traffic.  On  the  other 
hand,  where  the  rate  on  a  single  article  is  in  issue, 
the  question  (which  could  not  arise  in  the  former 
case),  whether  the  rate  is  unjustly  discriminatory  or 
unduly  preferential,  may  be  presented,  and  the  reason- 
ableness of  the  rate  depends  upon  the  value,  volume, 
and  other  characteristics  affecting  the  transportation 
of  the  particular  commodity  to  which  it  is  applied. 
*  *  * 

The  rate  on  one  article  of  traffic  may  be  reasonably 
high  and  the  carrier  fail  to  earn  a  fair  return  on  the 
value  of  the  entire  property  employed  for  the  public 
convenience  because  of  unreasonably  low  rates  on 
other  traffic;  and,  vice  versa,  the  rate  on  one  article  of 
traffic  may  be  unremunerative  or  unreasonably  low 
and  the  return  to  the  carrier  from  its  entire  business 
may  be  fair  or  reasonably  high,  the  deficiency  under 
the  rate  on  the  one  article  of  traffic  being  made  up  by 
the  rates  on  the  balance  of  the  traffic. — Interstate  Com- 
merce Commission,  539,  Central  Yellow  Pine  Associa- 
tion vs.  Illinois  Central  Railroad  Company  et  al. 

Other  Prices  that  Enter  into  Cost 

A  railroad  rate  is  a  fluctuating  thing  in  the  cost  of 
its  production,  and  from  an  economic  standpoint  no 
law  can  fairly  fix  a  future  rate  which  does  not  fix 
those  material  elements  upon  which  the  rate  depends. 
As  was  pertinently  asked  by  Mr.  Ben  ton,  an  able  law- 


Ill 


yer  of  my  own  State,  If  the  State  fixes  the  price  that 
railroads  are  to  receive  for  transportation,  would  it 
fix  also  the  prices  that  go  into  the  making  of  the  cost 
of  that  transportation? — Hon.  Samuel  W.  McCall, 
speech  in  House  of  Representatives,  February  2,  1906. 

On  the  Lines  of  the  Common  Law 

The  policy  of  governmental  control  and  limitation  of 
profits  through  regulation  of  rates  does  not  seem  well 
adapted  to  secure  any  of  the  main  objects  of  regula- 
tion of  railways.  It  appears  to  be  more  apt  to  injure 
than  to  benefit  the  public.  The  most  equitable,  effec- 
tive, and  beneficial  way  to  determine  and  fix  reason- 
able rates  is  to  proceed  in  much  the  same  way  that 
the  courts  determined  what  was  a  reasonable  rate 
under  the  common  law.  When  an  individual  rate  or  a 
schedule  of  rates  is  in  question,  whether  that  rate  or 
schedule  is  fair  and  reasonable  cannot  be  determined 
merely  by  reference  to  how  much  profit  the  railway  is 
making  in  the  aggregate;  for  if  the  road's  profits 
were  small,  it  might  be  held  that  the  rate  or  schedule 
was  reasonable;  whereas  the  fact  might  be  that  the 
particular  rate  or  schedule  in  question  was  excessive, 
and  that  the  smallness  of  the  road's  profits  was  due  to 
the  excessiveness  of  this  rate  or  schedule,  or  to  the 
lowness  of  its  other  rates,  or  to  bad  management.  And 
if  its  profits  were  large  it  might  be  held  that  the  par- 
ticular rate  or  schedule  in  question  was  excessive; 
whereas  the  fact  might  be  that  that  rate  or  schedule 
actually  was  unfairly  low,  and  that  the  road's  profits 
were  all  derived  from  other  and  higher  rates.  Simi- 
larly, if  the  large  profits  of  a  single  road  were  con- 
sidered, it  might  be  held  that  its  rates  were  excessive ; 
whereas  investigation  might  disclose  that  other  roads 
hauling  the  same  kinds  and  amounts  of  traffic,  under 


112 


substantially  similar  conditions,  for  the  same  rates, 
were  making  small  or  no  profits;  which  would  show 
that  the  differences  in  profits  were  mainly  or  entirely 
due  to  differences  in  the  skill  of  the  managements. — 
S.  O.  Dunn:  Shall  Railway  Profits  l€  Limited?  Journal 
of  Political  Economy,  October,  1910. 

Freight  Rates  on  Food  Products 

Secretary  Wilson  shows  that  the  proportion  of  the 
consumer's  price  that  goes  to  the  retailer  as  his  com- 
pensation for  delivering  milk  from  the  railway  station 
to  the  residence  of  the  consumer  is  more  than  six 
times  as  great  as  that  received  by  the  railway  for 
carrying  it  from  the  dairy  station  to  the  city.  When 
the  farmer  receives  50  per  cent  of  the  consumer's 
price,  the  freight  charge  on  butter  is  about  five-tenths 
of  one  per  cent  of  the  consumer's  price;  on  eggs,  six- 
tenths  of  1  per  cent;  apples,  6.8  per  cent;  beans,  2.4 
per  cent ;  potatoes,  7.4  per  cent ;  grain  of  all  sorts,  3.8 
per  cent;  hay,  7.9  per  cent;  cattle  and  hogs,  1.2  per 
cent;  live  poultry,  2.2  per  cent;  wool,  three-tenths  of 
one  per  cent.  These  percentages  given  by  the  Secretary 
are  averages  for  the  United  States,  and,  of  course,  do 
not  hold  good  as  to  all  shipments  of  the  commodities 
mentioned,  as  there  would  necessarily  be  wide  differ- 
ences due  to  variations  in  the  distances  shipped  and 
to  other  circumstances.  They  demonstrate,  however, 
that,  generally  speaking,  railway  freight  charges  are 
relatively  a  small  factor  in  the  margin  between  the 
price  received  by  the  farmer  and  that  paid  by  the 
consumer,  and  that  the  greater  proportion  of  this 
margin  goes  to  those  who  handle  the  products  after 
they  leave  the  hands  of  the  carrier. — W.  W.  Finley: 
Address  at  a  Meeting  of  the  Agricultural  Societies, 
Baltimore,  Md.,  November  22,  1912. 


113 


Excessive  Rates  Injurious  to  Railroads 

It  is  the  duty  of  the  railway  not  only  to  make  its 
rates  fair  as  between  different  commodities,  shippers, 
and  communities,  but  also  to  make  them  .reasonable — 
that  is,  not  excessive.  I  believe  the  railways  of  the 
United  States  have  fully  discharged  that  duty.  Traffic 
cannot  grow  rapidly  on  excessive  rates,  and  industry 
and  commerce  cannot  thrive  on  them.  But  traffic  and 
industry  and  commerce  have  increased  in  an  unpre- 
cedented and  unparalleled  degree  on  the  rates  made 
by  American  railways. — E.  P.  Ripley,  Atlantic 
Monthly,  January,  1911. 

General  Principle  of  Rate-making. 

You  gentlemen  are  entirely  familiar  with  the  general 
principle  of  how  rates  are  made,  I  think  it  can  be  illus- 
trated, very  briefly,  by  a  situation  which  arose  in 
western  Kentucky  a  great  many  years  ago,  when  coal 
mines  were  first  opened  on  the  Henderson  Division  of 
the  Louisville  and  Nashville  Railroad.  At  that  time 
the  only  fuel  in  that  country  was  wood.  These  coal 
mines  were  opened.  The  railroad  company  wanted  to 
make  rates  to  haul  this  coal,  which  was  a  new  traffic. 
Strange  to  say,  the  railroad  company  did  not  select 
anybody  who  knew  anything  about  its  capitalization  to 
do  that.  It  selected  a  very  wise  man  who  was  operat- 
ing coal  mines  down  in  that  country,  and  said:  "You 
find  out  what  rates  will  move  this  traffic."  And  this 
gentleman  went  to  work  to  find  out  what  wood  cost  in 
the  various  towns  on  the  road,  and  what  was  the 
equivalent  in  coal  of  a  given  amount  of  wood.  He 
figured  out,  from  that,  what  consumers  of  fuel  in  those 
towns  would  be  willing  to  pay  in  order  to  get  coal 
instead  of  wood  to  burn.  He  figured  out  what  the  coal 


114 


could  be  put  on  the  cars  for  at  the  mines,  and  he 
figured  out  that  the  difference  was  the  rate  that  the 
railroad  company  would  have  to  charge  to  move  the 
traffic. 

That  is  typical  of  the  way  in  which  rates  are  made. 
The  rates  are  made  to  move  the  traffic.  They  are 
made  with  no  reference  to  dividends  on  stock. — Walker 
D.  Bines:  Statement  before  Railroad  Securities  Com- 
mission, December  22,  1910. 

Passenger  Rates 

The  passenger  trains  of  the  United  States  earned  on 
the  average  for  the  year  ending  June  30,  1908,  $1.27 
per  train  mile,  and  the  average  cost  per  train  mile  for 
expenses,  not  allowing  anything  for  taxes,  using  the 
total  freight  and  passenger  train  miles,  was  $1.47. 

From  this  it  is  plain  that  there  is  no  margin  in  the 
passenger  business  for  taxes,  interest,  and  dividends, 
and  that  passenger  train  service,  as  a  whole,  is  fur- 
nished without  profit,  and  often  to  the  detriment  of  the 
freight  business,  which  must  be  moved  promptly  for 
the  development  of  the  country. — Howard  Elliott,  ad- 
dress at  the  Montana  State  Fair,  Helena,  Mont.,  Sep- 
tember 26,  1910. 

The  2-Cent  Maximum  Fare 

This  country,  as  it  grows  in  population  and  wealth, 
wants  more  and  ,  better  passenger  train  service  and 
better  stations,  just  as  it  wants  more  and  better  hotels 
and  more  and  better  street  paving  and  lighting,  more 
and  better  restaurants;  but  in  the  case  of  the  hotels, 
paving,  lighting,  restaurants,  and  many  other  things, 
the  public  are  willing  to  pay  more  and  do  pay  more 
for  the  better  facilities.  Not  so  with  the  railways. 


115 


With  more  trains,  heavier  trains,  faster  trains,  more 
luxurious  trains,  and  better  track,  there  has  swept 
over  the  country  a  wave  of  legislation  for  a  2-cent 
fare.  The  2-cent  maximum  fare  is  unjust,  and  retards 
the  development  of  the  very  things  the  railway  user 
wants,  because  it  is  obvious  the  railway  owner  must 
sooner  or  later  stop  doing  so  much  work  without  any 
margin  of  profit  at  all. 

In  England  the  first-class  passenger  rate  is  4  cents ; 
second-class,  2%  cents,  and  the  third-class,  2  cents. 

In  Germany,  the  first-class  is  3  cents;  second-class, 
2.55  cents ;  third-class,  1.79  cents ;  but  the  second  and 
third-class  accommodations  in  England  and  Germany 
are  nowhere  near  as  good  as  those  furnished  the 
traveler  in  the  United  States. — Howard  Elliott,  ad- 
dress at  the  Montana  State  Fair,  Helena,  Mont.,  Sep- 
tember 26,  1910. 

Importance  of  Fair  Rates 

The  capital  required  for  this  progressive  develop- 
ment must  come  as  the  result  of  the  sale  of  securities 
whose  attractiveness  and  safety  will  depend  upon  the 
earning  capacity  of  the  railroad  rather  than  upon  the 
value  of  the  property  as  a  salable  asset.  This  earning 
capacity  must  be  shown  to  be  uniform  and  progressive, 
year  in  and  year  out.  Its  sole  foundation  rests  upon 
fair,  reasonable,  and  suitable  rates.  When  the  in- 
vesting public  is  satisfied  that  a  policy  which  will  per- 
mit such  stability  has  been  adopted  as  the  result  of 
deliberate  judgment  of  the  people  of  this  country,  I 
feel  safe  in  predicting  that  the  necessary  capital  will 
be  available  to  the  railroads  on  silch  terms  as  will 
enable  them  to  perform  a  far  greater  service  to  the 
people  than  they  have  been  able  heretofore  to  render. 


116 


In  the  creation  of  this  public  sentiment,  the  shippers 
must  take  the  leading  part,  and  I  appeal  to  thoughtful 
men  that  it  is  absolutely  to  the  interest  of  the  shippers 
that  this  condition  may  be  brought  about.  These 
facts  are  the  basis  of  a  legitimate  appeal  for  the  con- 
sideration and  co-operation  of  all  shippers,  both  large 
and  small.  The  American  House  of  Industry  is  of 
imposing  strength,  but  even  with  harmony  and  co- 
operation its  strength  is  not  greater  than  is  needed  in 
the  contest  that  is  in  progress.  Divided  it  cannot 
stand,  much  less  could  it  continue  in  prosperous  de- 
velopment.— L.  E.  Johnson,  President  NorfolJc  <6  West- 
ern Railway  Co.,  "before  the  Traffic  Club  of  Pittsburgh, 
November  9,  1911. 

How  the  Present  System  of  Rates  Grew 

I  have  been  rather  intimately  connected  with  the 
management  of  railroads  for  over  twenty-five  years, 
and  during  that  period  have  had  occasion  to  specially 
study  rate-making  problems.  During  all  that  period  I 
have  not  known  a  single  rate  to  be  increased  or  in  any- 
wise changed  on  account  of,  or  with  a  view  to,  the 
bond  interest  or  stock-dividend  needs  or  requirements 
of  the  company,  or  indeed  with  any  regard  to  the 
financial  necessities  of  the  company.  Traffic  men  as 
such  have  nothing  to  do  with  the  financial  management 
of  railroads.  Their  thought  is  not  in  that  direction, 
but  is  toward  the  traffic  and  the  commercial  condi- 
tions affecting  the  railroads.  I  doubt  if  there  are  a 
dozen  traffic  managers  or  general  freight  agents  in 
the  whole  country  who  know  the  amount  of  stock  or 
bonds  or  the  fixed  charges  or  annual  dividend  pay- 
ments of  their  companies.  If  they  have  such  knowledge 
it  is  acquired,  not  by  reason  of  any  official  use  they 
have  to  make  of  it,  but  merely  as  a  matter  of  general 


117 

information.  Not  only  from  my  own  experience,  but 
from  observation,  I  feel  entirely  warranted  in  stating 
that  the  railroad  rates,  both  passenger  and  freight, 
prevailing  throughout  the  United  States  today  were 
not  made,  and  were  not  in  anywise  influenced,  by  the 
bonds  and  stocks  outstanding;  and  that  the  needs  of 
the  companies  for  interest  on  bonds  and  dividends  on 
stocks  had  nothing  whatever  to  do  with  the  fixing  of 
such  rates.  If  you  ask  me  to  state  all  the  factors  that 
entered  into,  and  that  still  enter  into,  the  making  of 
rates,  it  is  impossible  for  me  to  do  so.  They  are  as 
innumerable  as  the  transactions  in  the  commercial  and 
business  life  of  the  nation.  They  grew  out  of  the 
needs  of  each  community,  each  station,  each  industry, 
each  commodity,  and  each  individulal ;  and  as  the 
needs  of  one  of  these  were  met  the  rate  resulting  would 
often,  and  I  may  say  generally,  affect  a  different  com- 
munity and  different  individuals  in  such  other  com- 
munity, and  require  the  readjustment  of  the  rate 
there ;  and  so  on  almost  without  limit.  Out  of  such 
considerations  as  these  the  present  system  of  rates 
grew.  I  know  of  no  better  way  to  illustrate  or  define 
their  character  than  to  say  that  they  developed  much 
like  the  common  law  of  England.  They  grew  up  with 
conditions,  just  as  the  common  law  of  England  did; 
and  they  will  go  on  growing  and  requiring  change  from 
time  to  time  just  as  the  common  law  of  England  has 
required  change  by  statutory  enactments  in  order  to 
adapt  the  system  to  modern  needs  and  progress.  Such 
changes  in  rate  schedules  must  be  made  from  time  to 
time;  and  the  method  of  making  them  must  be  very 
flexible,  so  as  to  respond  to  the  needs  and  requirements 
of  business  in  each  community  and  in  each  industry,  if 
our  commercial,  industrial,  and  agricultural  develop- 
ment is  to  continue  naturally.  The  one  fact,  however, 
that  I  wish  to  anirm  with  entire  assurance  is  that  the 


118 


rates  we  have,  and  under  which  the  business  of  the 
country  has  hitherto  been  done,  were  not  dictated  or 
influenced  to  any  extent  or  in  any  degree  by  the  amount 
of  stocks  or  bonds  outstanding  or  the  rates  of  interest 
or  dividends  paid  thereon.  Perhaps  the  best  evidence 
of  the  truth  of  this  is  that  all  competing  railroads 
maintain,  and  must  of  necessity  maintain,  the  same 
rates,  whilst  the  amount  of  their  stock  and  bonds  and 
their  annual  interest  and  dividend  requirements  vary 
to  the  greatest  imaginable  extent— some  paying  large 
dividends,  some  small  dividends,  and  others  no  divi- 
dends at  all,  although  serving  the  same  territory,  seek- 
ing the  same  traffic,  and  necessarily  charging  the  same 
rates. — R.  8.  Lovett,  Statement  before  Railroad  Se- 
curities Commission,  December  21,  1910. 

Development  of  Railway  Tariffs 

I  am  the  manager  of  a  railroad  extending  250  miles 
from  A  to  B.  At  C,  a  distance  of  50  miles  from  A,  is 
located  a  coal  mine,  at  which  the  cost  of  placing  the 
coal  upon  the  cars  is  one  dollar  per  ton.  Coal  of  that 
ling  of  that  coal  for  a  distance  of  50  miles, 
grade  sells  in  the  open  market  at  A  for  $2.25  per  ton. 
I  establish  a  rate  of  one  dollar  per  ton  for  the  hand- 

This  is  certainly  a  liberal  rate;  but  the  earnings  of 
my  road  as  a  whole  are  not  excessive;  nor  can  the 
rate  itself,  five  cents  per  100  pounds,  be  regarded  as 
extortionate.  The  owner  of  the  mine  is  perfectly  satis- 
fied, for  he  is  making  a  magnificent  profit  upon  the 
operation  of  his  property.  A  is  a  prosperous  com- 
munity, buying  its  coal  cheaper  than  most  communi- 
ties. 

I  resign  as  manager  of  this  road  and  become  the 
manager  of  another  road  extending  in  the  opposite  di- 
rection from  A,  250  miles  to  X.  The  two  roads  are  in 


119 

all  respects  identical,  the  cost  of  construction,  capitali- 
zation, business — everything  is  substantially  the  same. 

At  X  is  located  a  coal  mine  precisely  similar  to  that 
at  C.  The  cost  of  producing  coal  upon  the  cars  is  one 
dollar  per  ton,  and  the  coal  will  sell  in  the  market  at 
A  for  $2.25  per  ton.  I  establish  a  rate  for  the  haul  of 
250  miles  of  $1.15  per  ton. 

Now,  have  I  in  these  two  cases  been  guilty  of  any 
wrong?  In  the  first  instance  everybody  is  satisfied ; 
everybody  is  prosperous.  In  the  second  case,  the  mine 
at  X  is  not  as  prosperous  as  the  one  at  C,  for  the 
profit  of  the  miner  at  C  is  two  and  one-half  times  as 
great;  but  still  the  miner  at  X  operates  to  advantage 
upon  a  profit  of  ten  cents  per  ton.  The  return  to  my 
railroad  is  not  satisfactory  under  the  rate  of  $1.15 ; 
but  that  figure  is  better  than  nothing  at  all.  In  other 
words,  the  traffic  will  bear  one  dollar  in  one  case  and 
$1.15  in  the  other ;  therefore,  I  impose  one  dollar  in  the 
first  case  and  $1.15  in  the  second  case.  Nor  does  it 
seem  to  me  that  the  traffic  manager  can  be  accused 
either  of  inconsistency  or  of  moral  dereliction  who 
establishes  rates  as  suggested  in  this  illustration. 

The  case  which  I  have  put  is  an  extreme  one ;  but  it 
illustrates  the  principles  under  which  the  railroad 
tariffs  of  this  country  have  been  developed.  The  study 
of  the  traffic  manager  has  been  to  get  business,  and  he 
has  made  such  rate's  as  were  necessary  to  secure  that 
business.  The  rates  actually  made  in  pursuance  of 
this  idea  have  been  often  inconsistent  and  have  pro- 
voked severe  criticism.  It  does  not  seem  to  me  that 
the  application  of  the  principle  is  of  necessity  wrong. 
Upon  the  contrary,  its  application,  within  reasonable 
bounds,  is  healthy  both  for  the  railway  and  for  the 
community. — Hon.  Charles  A.  Prouty:  Transportation. 
Address  before  Senior  Class,  Sheffield  Scientific  School, 
Yale  University,  1910. 


120 


What  is  a  Reasonable  Rate? 

It  is  even  difficult  to  say  what  constitutes  a  reason- 
able rate,  and  more  difficult  to  give  in  detail  the 
reasons  that  lead  to  that  conclusion.  Although  the 
Supreme  Court  of  the  United  States  has  furnished 
certain  rules  by  which  to  test  the  reasonableness  of 
transportation  charges,  and  although  this  Commission 
has  'endeavored  to  apply  these  rules,  yet,  whenever  it 
has  interrogated  railway  officials  as  to  whether  or  not 
they  are  governed  by  them  in  making  rate  schedules 
they  have  invariably  answered  in  the  negative  and  said 
that  to  do  so  would  be  impracticable. — The  Interstate 
Commerce  Commission. 

All  railways  alike,  whether  they  be  in  State  or  in 
private  hands,  must  base  their  rates  on  what  the  traffic 
will  bear.  *  *  * 

Further,  the  great  bulk  of  the  cases  which  make  up 
the  practical  work  of  a  railroad:  "What  is  a  reason- 
able rate,  having  regard  to  all  the  circumstances,  pres- 
ent and  prospective,  of  the  case?  Would  it  be  reason- 
able to  run  a  new  train  or  to  take  off  an  old  one? 
Would  it  be  reasonable  to  open  a  new  station,  to  ex- 
tend the  area  of  free  cartage,  and  the  like?" — all  these 
are  questions  of  discretion,  of  commercial  instinct. 
They  can  only  be  answered  with  a  "Probably  on  the 
whole,"  not  with  a  categorical  "Yes"  or  "No,"  and  they 
are  absolutely  unsuitable  for  determination  by  the 
positive  methods  of  the  law  court,  with  its  precisely 
defined  issues,  its  sworn  evidence,  and  its  rigorous 
exclusion  of  what,  while  the  lawyer  describes  it  as 
irrelevant,  is  often  precisely  the  class  of  consideration 
which  would  determine  one  way  or  other  the  decision 
of  the  practical  man  of  business. 


121 


What  we  need  is  a  system  under  which  the  respon- 
sibility rests,  as  at  present,  with  a  single  man  (let  us 
call  him  the  general  manager),  and  he  does  what  he 
on  the  whole  decides  to  be  best,  subject,  however,  to 
this :  that  if  hp  does  what  no  reasonable  man  could  do, 
or  refuses  to  do  what  any  reasonable  man  would  do, 
there  shall  be  a  power  behind  to  restrain,  or,  as  the 
case  may  be,  to  compel  him.  And  the  power  may,  I 
think,  safely  be  simply  the  minister — let  us  call  him 
the  President  of  the  Board  of  Trade.  For,  be  it  ob- 
served, the  question  for  him  is  not  the  exceedingly 
difficult  and  complicated  question,  "What  is  best  to  be 
done?'*  but  the  quite  simple  question,  "Is  the  decision 
come  to  which  I  am  asked  to  reverse  so  obviously 
wrong  that  no  reasonable  man  could  honestly  make 
it?  *  *  * 

A  reasonable  rate  is  a  rate  which  an  expert  manager 
would  fix,  or,  as  the  case  may  be,  would  maintain, 
having  carefully  considered  all  the  relevant  circum- 
stances and  being  actuated  solely  by  judicial  and  avow- 
able  motives. — W.  M.  Acworth. 

A  just  rate  does  not  mean  a  rate  which  a  particular 
shipper  can  pay  for  particular  goods,  but  rather  a  rate 
which,  when  enforced  and  maintained,  entails  in  a 
community  just  and  commendable  results* — Prof.  H.  C. 
Adams. 

Whether  any  specific  rate  is  too  low  can  only  be 
judged  by  knowing  the  cost  of  transportation,  a  diffi- 
cult fact  to  determine.  Whether  any  specific  rate  is 
too  high  can  only  be  judged  by  whether  it  interferes 
with  the  movement  of  the  traffic. — Frederick  A.  Delano. 

Railroad  companies  are  not  entitled  to  a  reasonable 
return  on  the  value  of  the  property  used.  They  are 


122 


entitled  only  to  what  they  can  earn,  be  it  much  or 
little,  by  charging  rates  that  are  just,  reasonable  and 
undiscriminatory,  the  reasonableness  of  such  rates 
being  determined  by  commercial  and  competitive  con- 
ditions and  the  value  of  the  service  to  the  shipper  and 
to  the  railroad. 

Rates  adjusted  on  the  value  of  the  service  principle, 
intelligently  and  fairly  applied,  are  just  alike  tor  the 
railroad  and  to  the  shipper. 

The  reasonableness  of  rates  can  only  be  determined 
by  the  facts  bearing  upon  each  particular  case. 
Reasonableness  of  revenue  is  a  legal  fiction. — Henry 
Fink. 

The  only  just  method  of  determining  the  reasonable- 
ness of  transportation  charges  is  to  measure  them  by 
the  services  performed,  and  neither  capitalization  nor 
cost  of  railway  construction,  either  as  a  matter  of 
economics  or  practice,  can  have  any  controlling  bearing 
on  the  fixing  of  any  specific  rate. — W.  W.  Finley. 

A  reasonable  rate  is  a  point  the  lower  line  of  which 
is  the  constitutional  minimum.     "The  upper  boundary  , 
line  is  the  rate  which  is  just  and  reasonable  under  all 
the  circumstances  which  honest  business  men  would 
have  the  right  fairly  to  consider." — Walker  D.  Bines. 

This  requires  a  great  number  of  factors  to  be  taken 
into  account,  just  as  they  have  always  entered  into  the 
making  of  railroad  rates,  such  as  the  cost  of  the  service 
to  the  carrier ;  the  value  of  the  service  to  the  shipper ; 
the  previous  rate  on  the  same  article;  the  rate  else- 
where on  the  same  article ;  rates  on  similar  articles  in 
the  same  or  other  localities ;  the  competition  of  mar- 
kets ;  the  intrinsic  value  of  the  commodity ;  the  risk  of 
breakage  or  other  injury  in  transit;  the  insurance 


123 


risk;  "what  the  traffic  will  bear"  (a  much-abused 
phrase)  ;  or,  in  somewhat  less  offensive  form,  "what 
the  traffic  can  afford" ;  and  a  great  variety  of  other 
circumstances  and  conditions  which  cannot  be  enumer- 
ated abstractly. — R.  S.  Lovett. 

First  and  foremost,  there  never  was  any  better  defi- 
nition of  a  reasonable  rate  than  that  which  was  given 
many  years  ago  by  somebody  and  which  has  been  used 
as  a  byword  and  a  reproach  ever  since,  namely,  "what 
the  traffic  will  bear."  That  is  the  best  definition  that 
ever  was  given  of  it.  That  does  not  mean  all  the  traffic 
will  bear ;  it  does  not  mean  all  that  can  be  extorted  or 
squeezed  out  of  it,  but  what  the  traffic  will  bear  having 
regard  to  the  freest  possible  movement  of  commodities, 
the  least  possible  burden  on  the  producer  and  on  the 
consumer. — E.  P.  Ripley. 

While  it  is  possible  some  rates  are  too  high,  there  is 
no  question  but  what  it  can  be  proven,  with  reason- 
able diligent  effort  before  a  competent  and  impartial 
tribunal,  that  most  of  the  rates  are  low  in  and  of 
themselves  and  not  commensurable  to  service  per- 
formed, and  on  the  merits  should  be  advanced. — Y. 
Van  den  Berg. 

It  is  the  demand  for  a  commodity  and  the  price  of  it 
which  mainly  determine  the  freight  rate  for  it. — 
F.  W.  Whitridge. 

The  question  of  what  is  a  fair  and  reasonable  freight 
rate  is  also  a  difficult  one  to  determine.  Certain  it  is, 
as  I  view  it,  that  the  sum  of  all  such  rates  must  at 
least  be  sufficient,  when  combined  with  efficient  man- 
agement, to  furnish  such  net  earnings  as  .will  enable 
the  individual  road  to  obtain  the  necessary  new  capital 
when  needed  on  a  favorable  basis. — Daniel  Willard. 


124 


Rates  for  railway  service  must  be  fixed  at  such  a 
level  that  the  service  obtained  by  the  shipper  is  worth 
to  him  something  more  than  he  is  asked  to  pay  for  it. — 
W.  H.  Williams. 

Railroad  Rate  Not  a  Tax 

One  ground  upon  which  specific  governmental  con- 
trol of  the  prices  charged  for  transportation  is  urged 
is  that  a  railroad  rate  is  a  tax.  A  tax  primarily  is  a 
levy  for  the  support  of  a  government,  laid  sometimes 
upon  people  and  sometimes  upon  commodities.  A 
price  is  a  measure  of  the  services  embodied  in  a  com- 
modity. The  disposition  of  the  revenue  derived  from 
taxation  is  mainly  for  the  preservation  of  peace  and 
order  and  the  public  health,  the  maintenance  of  the 
conditions  under  which  the  people  may  carry  on  their 
vocations.  The  aggregate  of  price  measures  that 
aggregate  of  service  which  constitutes  the  carrying 
on  of  the  vocations  of  the  people.  A  railroad  rate 
represents  payment  for  service  rendered,  a  service  that 
enters  into  the  cost  of  production  of  commodities  and, 
with  other  factors,  constitutes  that  cost  of  production. 
It,  therefore,  in  no  sense  is  a  tax ;  a  railroad  rate  is  not 
a  levy,  but  a  measure  of  service.  That  is,  how  can  the 
transportation  charge  be  designated  a  tax  any  more 
than  any  other  charge  entering  into  the  cost  of  pro- 
ducing a  commodity?  If  it  were  true  that  the  freight 
charge  is  a  tax,  a  large  portion  of  the  value  of  every 
article  of  food,  of  clothing,  of  every  structure,  is  a  tax ; 
and  inasmuch  as  certain  States  tax  the  earnings  of 
the  railroads,  they  would  be  imposing  a  tax  upon  a 
tax. — L.  G.  McPherson:  The  Working  of  the  Railroads, 
1907. 


125 


Good  Credit  and  a  Fair  Return 

All  questions  of  valuation  and  rate  making  cannot 
evade  the  main  problem  of  credit  and  a  fair  return 
on  capital.  If  this  cannot  be  had,  public  ownership  is 
the  only  alternative,  but  we  believe  public  opinion 
will  continue  to  endorse  and  support  private  owner- 
ship and  operation  under  governmental  regulation. 

Confronted  by  this  situation,  the  railroads  have 
made  a  public  appeal  not  for  the  maximum  rate  which 
under  their  charters  they  are  entitled  to  charge,  but 
for  a  moderate  increase  over  the  minimum  rates  now 
in  existence.  On  such  a  basis  as  that  they  confi- 
dently rely  upon  public  support,  preferring  to  make 
this  appeal  so  that  railroad  enterprise  may  not  be 
halted,  but  that,  on  the  contrary,  railroad  manage- 
ments will  continue  to  assume  their  full  responsibility, 
and  provide  the  facilities  and  service  to  make  the 
country  progress. — Samuel  Rea:  Address  at  a  meet- 
ing of  shippers  at  Boston,  June  12,  1913. 

Purchasing  Power  of  Railway  Receipts 

He  who  would  know  why  railroad  development  is 
lagging  behind  in  the  United  States  must  look  not  only 
below  gross  receipts,  operating  expenses,  and  net 
revenue  to  the  income  account  of  the  railways,  but  he 
must  take  cognizance  of  the  essential  changes  during 
recent  years  in  values  in  general,  and  even  in  the 
value  of  money  itself.  *  *  *  *  While  railway 
rates  as  indicated  by  the  average  receipts  a  ton  a  mile 
have  changed  but  little  since  1900,  as  expressed  in 
money,  they  have  when  expressed  in  the  purchasing 
power  of  money  declined  on  the  average  at  least  23 
per  cent. — New  York  Sun,  October  14,  1912. 


126 


Seven  Cents  for  All  a  Man  Wears 

To  assemble,  for  example,  here  in  New  Brunswick, 
or  in  any  other  city  between  the  Atlantic  and  the 
Mississippi,  the  articles  of  apparel  in  which  a  man 
goes  about  the  public  street,  a  charge  is  made  by  the 
steam  railroads  of  less  than  7  cents.  Similar  exam- 
ples might  be  given  in  sufficient  number  to  demon- 
strate that  the  transportation  charge  under  what  are 
known  as  the  "classified"  rates  is  so  small  that  it 
does  not  affect  the  retail  price  of  the  staple  articles 
of  general  use.  On  the  traffic  moving  under  "com- 
modity" rates,  such  as  coal  and  iron  ore,  the  rates  are 
small  in  proportion  to  those  charged  by  European 
roads  if  compared  on  the  basis  of  the  money  unit  of 
value.  They  are  vastly  smaller  if  compared  on  the 
basis  of  the  average  daily  pay  of  common  labor,  which 
I  think  is  a  much  more  equitable  basis. — L.  F.  Loree: 
Address  at  annual  dinner  of  Alumni  Association  of 
Rutgers  College,  New  Brunswick,  N.  J.,  June  17,  1908. 

The  Laws  of  Trade 

It  is  clear  that  even  with  the  whole  power  of  the 
European  governments,  the  laws  of  trade  have  proved 
too  strong  for  any  arbitrary  attempt  at  railroad  regu- 
lation to  succeed.  The  effort  to  base  rates  upon  cost 
of  service  has  only  resulted  in  a  compromise. — Arthur 
T.  Hadley:  Railroad  Transportation. 

Rates  and  Prices 

Compared  with  the  average  of  the  decade  from 
1890  to  1899,  the  average  wages  for  1905  were  14  per 
cent  higher  and  the  average  hours  of  labor  per  week 


127 


4.1  per  cent  lower.  Food  advanced  an  average  of  12.4 
per  cent  and  all  commodities  an  average  of  15.9  per 
cent.  The  average  rate  per  ton-mile  of  the  railroads 
decreased  8.8  per  cent.  The  men  who  ship  the  larger 
portion  of  the  freight  say,  almost  without  exception, 
that  railroad  rates  are  low. — L.  G.  McPherson:  The 
Needs  of  the  Railroads.  Political  Science  Quarterly, 
September,  1908. 

Conditions  that  Control  Charges 

The  persistence  of  the  delusion  that  rates  are  con- 
trolled by  the  par  value  of  securities  is  curious  and 
unaccountable.  Throughout  the  whole  history  of 
American  railway  development  parallel  routes  have 
been  represented  by  widely  different  amounts  of  secur- 
ities and  have  carried  at  identical  rates  or,  in  many 
instances,  the  route  having  the  highest  par  of  securi- 
ties has  carried  at  a  differential  lower  than  its  com- 
petitors; rates  have  gone  down  as  the  par  value  of 
securities  has  been  augmented  by  new  issues  and  the 
issues  of  securities  have  repeatedly  been  revised  be- 
cause the  commercial  conditions  that  control  rates 
made  such  revision  necessary..  *  ,*  *  The  condi- 
tions that  control  railway  charges  do  not  seem  to  me 
to  be  hard  to  discover.  At  each  end  of  the  railway 
service  there  is  a  market;  at  the  market  of  origin 
there  is  a  marginal  producer  whose  product  is  re- 
quired in  the  other  market  and  whose  traffic  is  wanted 
by  the  railway,  at  the  market  of  destination  there  is 
a  marginal  consumer  who  fixes  the  price  there.  The 
difference  between  these  prices  must  satisfy  the  rail- 
way and  all  the  other  agencies  employed  in  getting 
the  product  from  the  producer  to  the  consumer;  how 
they  divide  this  amount  is  a  matter  dependent  upon 
skillful  and  fair  trading,  subject  to  such  regulation 


128 


as  public  authority  has  imposed. — H.  T.  Newcomb: 
Government  Regulation  of  Railway  Capitalisation. 
Part  I.  Railway  World,  March  10,  1911. 

Value  of  th£  Article 

At  first  thought  it  would  appear  that  the  value  of 
the  article  ought  not  to  be  taken  into  account  in  de- 
termining the  transportation  charge.  A  ton  of  cotton, 
it  would  appear,  ought  to  be  carried  as  cheaply  as  a 
ton  of  silks.  It  would  also  appear  to  one  who  has  not 
studied  the  question  that  a  charge  of  a  certain  amount 
per  mile,  taking  into  account  weight,  bulk,  perishabil- 
ity, and  the  expense  of  loading  and  unloading,  would 
be  just.  Such  a  method  of  fixing  rates,  however, 
would  stagnate  the  whole  movement  of  commodities 
at  once.  These  theories  were  discarded  long  before 
railways  came  into  existence.  If  the  bulk  and  weight 
of  articles  were  made  the  basis  of  charging,  a 
prohibitive  tariff  would  at  once  be  laid  on  the  move- 
ment of  many  important  commodities.  If  a  purely 
distance  tariff  were  established,  it  would  bankrupt  the 
Western  agricultural  States  and  stagnate  exportation 
of  the  chief  commodities  of  foreign  commerce. 

Therefore,  the  value  of  the  article  must  be  taken 
into  account  when  fixing  its  carriage  charge.  Prop- 
erly speaking,  the  ability  of  the  article  to  pay  must.be 
reckoned  with.  That  is  generally  determined  by  its 
value.  In  other  words,  a  rate  has  to  be  fixed  for  each 
commodity  at  which  it  will  move.  If  the  rate  on  agri- 
cultural products  was  the  same  per  ton  as  the  rate  on 
cutlery,  not  a  bushel  of  wheat  would  move  any  great 
distance  by  rail  for  export.  This  fact  was  recognized 
in  the  shipping  industry  long  before  railroads  were 
thought  of. — Anthony  Van  Wagenen:  Government 
Ownership  of  Railways. 


129 


Why  Rates  Can  Be  Advanced 

The  whole  history  of  American  railroading,  indeed, 
is  filled  with  instances  of  railroads  built  through  terri- 
tory in  the  development  stage  keeping  their  freight 
rates  below  the  value  of  the  service  rendered  in  order 
to  give  new  industries  located  along  the  line  a  chance 
to  get  a  foothold  and  grow  strong.  There  is  nothing 
altruistic  about  it.  It  is  a  matter  of  business,  pure 
and  simple.  The  prosperity  of  the  railroad  depends 
upon  the  prosperity  of  the  territory  it  serves,  and  for 
the  railway  to  forego  immediate  returns  in  order  to 
build  up  future  business  is  a  most  reasonable  sort  of 
policy.  The  industries  located  along  its  lines  having 
developed  and  become  firmly  established  as  a  result  of 
low  freight  rates,  the  traffic  can  bear  more  and  rates 
can  be  advanced  to  a  point  where  the  railway  can 
make  a  reasonable  profit  out  of  handling  the  busi- 
ness.— FranJdinEscher:  The  Delicate  Question  of  Rail- 
way Credit.  North  American  Revieic,  February ',  1913. 

What  the  Railroads  Get 

The  price  paid  by  the  housekeeper  per  dozen  for 
eggs  during  the  season  of  shipment  seldom  exceeds  by 
more  than  five  cents  the  price  received  by  the  Western 
farmer  who  takes  them  to  the  country  store.  That  is, 
the  railroads  bring  eggs  a  thousand  miles  to  New 
York  for  a  cent  or  a  cent  and  a  half  a  dozen,  and  two 
thousand  miles  or  so  for  about  two  cents  and  a  half  a 
dozen,  the  dealers  taking  the  remainder  of  the  five 
cents  as  payment  for  handling.  The  net  difference 
between  the  price  paid  per  pound  for  butter  at  the 
creamery,  whether  in  New  York  City  or  in  the  Missis- 
sippi Valley,  and  that  paid  by  the  New  York  retail 


130 


dealer  averages  about  one  and  one-half  cents  for  com- 
mission and  one  cent  for  freight. 

In  December,  January,  and  February  turkeys  are 
taken  from  the  Texas  ranches  to  marketing  centers, 
the  transportation,  charge  on  ten  birds,  weight  one 
hundred  and  twenty  pounds,  .being  about  25  cents. 
After  these  ten  birds  have  been  dressed  and  packed 
they  weigh  about  one  hundred  and  two  pounds,  and 
the  freight  rate  from  Texas  to  New  York  is  $1.50  per 
100  pounds — that  is,  a  Texas  turkey  that  retails  in 
the  New  York  market  for  20  cents  a  pound  will  have 
paid  one  and  three-fourths  cents  per  pound  to  the  rail- 
roads that  took  it  from  the  ranch  to  the  concentration 
point,  and  thence  to  the  market.  The  farmer  in  Texas 
received  about  nine  cents  per  pound,  leaving  a  trifle 
over  nine  cents  to  be  divided  between  the  packing- 
house, the  produce  merchant,  and  the  retail  dealer. 
Chickens  and  other  dressed  poultry  that  come  from 
Chicago  pay  a  freight  rate  of  about  three-fourths  of  a 
cent  a  pound,  the  railroad  company  supplying  a  re- 
frigerator car,  and  keeping  them  iced  while  in  transit. 

The  rail  rate  from  Chicago  to  New  York  on  grain 
and  grain  products  for  domestic  consumption  has  been 
about  l7l/2  cents  per  100  pounds;  that  is,  a  bushel  of 
oats  or  corn  or  wheat,  that  may  bring  in  New  York 
anywhere  from  40  cents  to  $1,  has  been  brought  from 
the  Western  farm  for  from  8  to  15  cents.  Hay  that 
has  yielded  the  farmer  $18  or  $19  a  ton  and  sells  in 
New  York  at  about  $24,  has  paid  the  railroads  some- 
where from  $3  to  $5  per  ton,  according  to  whether  it 
came  from  the  meadows  of  the  Ohio  or  the  Mississippi 
valleys. 

A  bullock  that  weighs  1,200  pounds  will,  at  Chicago, 
bring  on  an  average  $5.50  per  100  pounds,  which  in- 
cludes an  average  of  5  cents  per  100  pounds  for  freight 
from  the  grazing  grounds.  Its  total  value  at  the 


131 


stock  yards,  therefore,  is  $66.  When  it  has  passed 
through  the  packing-house  its  weight  will  have  been 
reduced  to  700  pounds.  From  Chicago  to  New  York 
it  will  pay  45  cents  per  100  pounds  freight ;  or,  in  other 
words,  the  700-pound  carcass,  which,  if  retailed  at  an 
average  of  15  cents  a  pound,  would  bring  $105,  has 
paid  the  railroads  between  $3.50  and  $4  from  the  Far 
West  to  the  metropolis. 

On  potatoes  the  freight  rate  per  barrel  containing 
about  two  and  a  half  bushels  is  $1.05  from  Florida, 
65  cents  from  South  Carolina,  45  cents  from  North 
Carolina,  30  cents  from  Virginia,  and  from  this  12 
cents  per  bushel  the  rate  scales  down  to  5  or  6  cents 
per  bushel  from  near-by  regions.  The  freight  rate  on 
tomatoes  from  Florida  is  25  cents  per  package  of  six 
baskets,  from  Texas  15  cents  for  twelve  quarts,  from 
Mississippi  76  cents  per  100  pounds,  and  from  the 
near-by  farms  8  cents  per  bushel  of  twenty-eight 
quarts.  The  freight  rate  on  cantaloupes  to  New  York 
ranges  from  less  than  a  cent  for  a  melon  from  the 
Carolinas  to  about  2%  cents  for  that  from  California. 
Oranges  from  Florida  to  New  York  pay  the  railroads 
from  4  to  9  cents  a  dozen,  and  those  from  California 
6  to  12  cents  a  dozen,  as  they  may  be  large  or  small. 
A  three-pound  can  of  tomatoes  from  Maryland  pays 
the  railroad  about  one-half  cent  per  can. — L.  G.  Mc- 
Pherson:  Railroad  Freight  Rates. 

Rates  on  Staple  Articles 

In  response  to  inquiries  made  concerning  certain 
staple  articles  of  daily  and  general  use  in  various  of 
the  smaller  cities  and  towns  extending  from  Massa- 
chusetts to  Georgia  and  Illinois,  and  from  Michigan  to 
Mississippi,  it  has  been  ascertained  that  throughout 
this  region  the  transportation  charge  on  such  articles 


132 

ranges  as  follows:  On  a  man's  suit  of  clothes,  from 
two  to  eight  cents ;  on  calicos  and  ginghams,  from  one- 
fiftieth  of  a  cent  to  one-fifth  of  a  cent  a  yard;  the 
freight  charge  paid  on  the  entire  apparel  of  a  fully 
dressed  man  or  woman  in  this  section  would  range 
perhaps  from  6  or  7  to  16  or  18  cents.  The  rate  on  an 
ordinary  dining-room  suite,  consisting  of  table,  side- 
board, six  chairs,  and  a  china  closet,  would  average 
from  75  cents  to  $5 ;  on  a  parlor  suite  of  sofa  and  four 
chairs,  from  50  cents  to  $4 ;  on  a  bedstead  and  its  equip- 
ment, from  75  cents  to  $1.50,  in  each  case  from  the  fac- 
tory to  the  home.  The  lumber  used  in  the  ordinary  eight- 
room  house  will  have  paid  the  railroads  from  $35  to 
$150,  and  the  brick  from  $6  or  $8  to  $SO  or  $60,  as  the 
kiln  may  be  near  or  remote.  A  fifty-pound  sack  of 
flour  from  the  mill,,  even  at  Minneapolis,  in  but  a  few 
cases,  has  paid  a  freight  rate  of  over  8  or  9  cents  to 
the  consumer.  Products  of  the  beef  or  the  hog  are 
carried  from  the  western  packing-houses  throughout' 
this  territory  at  rates  that  vary  from  a  fifth  of  a  cent 
to  not  exceeding  a  cent  per  pound. — L.  G.  McPherson: 
Railroad  Freight  Rates. 

Rates  in  Different  Countries 

Railroad  rates  in  this  country  are  not  unreasonably 
high.  As  shippers  and  consumers  of  freight,  we  pay  a 
transportation  cost  less  than  one-half  that  of  Germany, 
barely  more  than  one-third  that  of  France,  and  but 
slightly  in  excess  of  one-fourth  that  of  England  and 
the  other  countries  of  Europe.  Following  are  the 
figures  for  the  last  year  [1907] : 


133 


Freight  cost  per 

Country.  ton-mile,  in 

cents. 

China 10 

Japan 05 

Russia . .. 022 

Italy 024 

Austria 0225 

Germany 015 

France 019 

England .026 

United  States 0069 

Besides,  the  cost  of  transportation  to  the  actual  con- 
sumer is  so  slight  a  quantity  as  never  to  disturb  his 
thoughts  except  when  forced  upon  his  attention  as  a 
campaign  issue.  A  careful  writer  has  computed  the 
amount  which  freight  charges  actually  add  to  the  cost 
at  Pittsburgh  of  necessary  articles  of  wear  and  con- 
sumption, and  I  give  you  some  of  them : 

A  suit  of  clothes,  three  cents ; 

A  pair  of  shoes,  one  and  one-half  cents ; 

A  man's  hat,  less  than  half  a  cent ; 

A  lady's  hat,  trimmed  for  wear,  less  than  one  cent ; 

Muslin,  one-twelfth  of  a  cent  per  yard ; 

Flour,  less  than  one-fifth  of  a  cent  per  pound ; 

Dressed  meats,  one-fourth  of  a  cent  per  pound ; 

Fish,  one-third  of  a  cent  per  pound; 

Vegetables  and  canned  goods,  one-sixth  of  a  cent  per 
pound. — Robert  Mather:  Railway  Regulation.  Speech 
before  Traffic  Club  of  Pittsburgh,  April  3,  1908. 

Steady  Decrease  of  Rates 

The  record  of  the  extension  of  lines  (with  the  rates 
for  which  they  were  extended)  reads  as  follows,  by 
decades : 


134 


Year. 

Miles  of 
line. 

Increase. 

Per 

cent. 

Rate  per 
ton-mile. 

Rate  per 
pass.  mile. 

1832.. 

229 

229 

1839.. 

2,302 

2,073 

905 

1849.. 

7,365 

5,063 

220 

1859.. 

28,789 

21,424 

291 

1869.. 

46,844 

18,055 

63 

• 

1879.. 

86,556 

39,712 

85 

*1.29c 

t2.422c 

1889.. 

161,276 

74,720 

86 

0.922 

2.165 

1899.  . 

194,336 

33,060 

20 

0.724 

1.978 

1909.. 

236,869 

42,533 

22 

0.763 

1.928 

*  1880.        1 1883. 

Except  for  individual  roads,  rates  for  the  earlier 
years  have  not  been  handed  down  to  us.  In  1852  the 
Pennsylvania  charged  4.64  cents  per  ton-mile,  and  the 
Erie  1.95  cents.  In  1865  the  freight  rates  on  four 
principal  trunk  lines  ranged  from  2.44  cents  to  3.45 
cents.  In  1875  six  low-rate  through  routes  charged 
1.01  to  1.53  cents  per  ton-mile,  and  by  1885  the  same 
lines  had  reduced  their  rates  to  0.55  cent  and  0.94 
cent.  The  roads  cited  had  lower  rates  than  the  aver- 
age, which  must  necessarily  include  a  large  proportion 
of  local  and  feeder  lines.  They,  however,  will  serve 
in  conjunction  with  the  figures  given  in  the  table,  to 
illustrate  the  progressive  fall  in  rates  that  continued 
until  1899. — Morrill  W.  Gaines:  A  Living  Rate  for  the 
Railroads.  Yale  Review,  New  Haven,  1910. 


REGULATION  AND  LEGISLATION. 


Congress  and  the  States 

There  is  no  room  in  our  scheme  of  government  for 
the  assertion  of  State  power  in  hostility  to  the  au- 
thorized exercise  of  Federal  power.  The  authority  of 
Congress  extends  to  every  part  of  interstate  com- 
merce, and  to  every  instrumentality  or  agency  by 
which  it  is  carried  on;  and  the  full  control  by  Con- 
gress of  the  subjects  committed  to  its  regulation  is  not 
to  be  denied  or  thwarted  by  the  commingling  of  in- 
terstate and  intrastate  operations. — Supreme  Court, 
Nos.  291,  292,  and  293,  October  Term,  1912,  Opinion 
Delivered  by  Justice  Hughes  June  9,  1913. 

Not  at  the  Mercy  of  Legislative  Caprice 

The  property  of  a  railroad  corporation  has  been 
devoted  to  a  public  use.  There  is  always  the  obliga- 
tion springing  from  the  nature  of  the  business  in 
which  it  is  engaged — which  private  exigency  may  not 
be  permitted  to  ignore — that  there  shall  not  be  an  ex- 
orbitant charge  for  the  service  rendered.  But  the 
State  has  not  seen  fit  to  undertake  the  service  itself ; 
and  the  private  property  embarked  in  it  is  not  placed 
at  the  mercy  of  legislative  caprice.  It  rests  secure 
under  the  constitutional  protection  which  extends  not 
merely  to  the  title  but  to  the  right  to  receive  just 
compensation  for  the  service  given  to  the  public. — 
Supreme  Court,  Nos.  291,  292,  and  293,  October  Term, 
1912,  Opinion  Delivered  J)y  Justice  Hughes,  June  9, 
1913. 

135 


136 


National  Control  of  Interstate  Commerce 

The  court  holds  that  Congress  has  complete  power 
to  control  interstate  commerce  and  to  regulate  it,  and 
that  this  necessarily  includes  the  power  to  regulate 
such  business  within  State  lines  as  affects  indirectly 
interstate  business. 

But  the  court  holds  that  until  Congress  acts  in  re- 
spect to  such  business  within  the  State  it  must  be  left 
to  the  action  of  the  State. 

The  judgment  of  the  court  is  a  broad  declaration  in 
favor  of  the  plenary  power  of  Congress  to  vest  the 
Interstate  Commerce  Commission  and  the  Federal 
courts,  or  some  other  appropriate  instrumentality, 
with  the  authority  to  regulate  and  restrict  such  im- 
proper or  prejudicial  interference  with  interstate  com- 
merce as  the  fixing  by  a  State  Railroad  Commission 
of  merely  State  rates  may  involve. 

The  result  of  the  main  issue  is  a  great  victory  in 
principle  for  the  national  control  of  interstate  com- 
merce and  the  possession  by  Congress  of  the  right  to 
use  every  appropriate  means  to  render  that  control 
effective  and  uniform. — William  H.  Taft  on  Supreme 
Court's  Decision  in  Minnesota  Rate  Cases,  June  9, 
1913. 

Federal  Authority  Over  Railroads 

The  Supreme  Court  points  out  that  the  authority 
of  the  United  States  may  be  made  as  complete  in  rail 
transportation  as  it  now  is  in  water  transportation. 
Practically  no  rate  can  be  made  by  State  commissions 
that  does  not  directly  affect  existing  interstate  rates. 
The  opinion  of  the  court  should  give  the  railroads  a 
means  amply  to  protect  the  structure  of  their  rates  if 
they  elect  to  maintain  those  authorized  by  the  Inter- 


137 

state  Commerce  Commission  and  resist  all  interfer- 
ence with  them  by  State  commissions.  If  this  policy 
is  consistently  pursued,  it  should  eliminate  the  States 
from  the  field  of  rate-making  as  fully  as  they  are  now 
elinlinated  from  control  of  water  navigation. — L.  F. 
Loree:  Apropos  of  the  decision  in  the  Minnesota  Rate 
Case,  June,  1913. 

Progress  of  Regulation 

Only  slowly  and  reluctantly  did  the  majority  of 
railroad  men  yield  to  public  control,  and  even  now 
some  of  the  operators  hold  the  older  attitude  to  be 
correct,  although  admitting  that  it  can  no  longer  be 
followed  in  practice.  The  railroads,  being  common 
carriers,  require  public  franchises,  and  therefore  have 
all  of  the  obligations  of  public  utilities.  But  the  pub- 
lic has  gradually  asserted  its  authority  over  them.  As 
early  as  1869  the  State  of  Massachusetts  established 
a  railroad  commission.  California  did  the  same  in 
1876,  New  York  in  1882.  But  these  early  commissions, 
and  those  of  other  States,  did  not  attempt  any  large 
control.  Indeed  they  did  not  have  authority  to  do  so. 
Their  power  was  usually  limited  to  that  of  recom- 
mendations to  the  Attorney-General.  Illinois  created 
a  railroad  commission  in  1871,  which  in  1873  was 
given  power  to  prescribe  rates,  but  little  in  the  way 
of  effective  regulation  was  accomplished  during  this 
decade. 

While  in  Iowa  there  was  earlier  legislation  looking 
toward  the  control  of  railroads,  in  1897  a  law  was 
passed  which  went  a  long  way  towards  assuming  con- 
trol within  that  State.  The  rates  were  to  be  -'reason- 
able,"  and  the  findings  of  the  Commission  were  to  be 
prima  facie  evidence  of  the  reasonableness  of  the  rates. 
The  State  of  Wisconsin  in  1905  enacted  an  even  more 


138 


comprehensive  and  effective  law,  under  which  the  Com- 
mission was  given  ample  power  to  control  the  rates 
charged  within  the  State.  The  example  of  Iowa  and 
Wisconsin  has  been  followed  by  many  other  States. 

The  Interstate  Commerce  Commission,  when  it  was 
created  in  1887,  had  the  power  of  investigation,  but 
it  could  go  no  further  than  to  recommend  reparation 
in  case  of  just  complaint.  It  was,  in  fact,  a  purely 
advisory  body.  Not  until  1906  was  the  law  so  amended 
by  Congress  as  to  give  to  the  Interstate  Commerce 
Commission  the  power  to  fix  minimum  rates.  In  1910 
the  Commission  was  given  the  further  power  to  sus- 
pend any  increase  of  rates  pending  investigation.  Thus 
it  is  only  five  years  ago  that  the  National  Government 
has  asserted  its  broad  authority  to  control  the  rates 
which  railroads  may  charge  in  interstate  commerce. — 
Commission  in  Arbitration  between  the  Eastern  Rail- 
roads and  the  Brotherhood  of  Locomotive  Engineers, 
Charles  R.  Van  Hise,  chairman. 

Regulation  Here  to  Stay 

Government  regulation-  is  here  to  stay,  and,  intelli- 
gently administered,  it  is  no  bugbear  to  railroad  owners 
or  managers.  On  the  contrary,  it  can  and  should  be  a 
protection  and  safeguard.  It  is  plain,  however,  to 
every  one  that  the  result  today  of  the  activity  of  the 
Federal  and  State  tribunals  has  greatly  altered  the 
position  of  railroad  securities  in  the  public  eye.  They 
no  longer  offer  opportunities  for  speculative  profits ;  the 
only  speculative  element  remaining  arises  from  and 
inheres  in  the  sensitive  fear  that  capital  always  ex- 
hibits in  the  face  of  hostile  or  adverse  conditions.  The 
investor,  wisely  or  not,  today  views  the  safety  and 
future  value  of  railroad  securities  with  distrust. 
Meager  returns,  coupled  with  doubt  about  the  public 


139 


intention  toward  invested  capital  in  railroad  proper- 
ties, are  making  it  more  difficult  and  also  more  ex- 
pensive to  secure  funds  for  the  urgent  improvements 
and  extensions  that  are  necessary  fully  to  equip  the 
railroads  to  keep  abreast  of  the  times.  Whether  this 
fear  is  well  grounded  remains  for  the  future  to  de- 
termine. Every  patriotic  citizen  should  persuade  him- 
self and  his  neighbor  that  this  great  industrial  servant 
is  in  safe  hands,  and  see  to  it  that  this  proves  to  be 
so.  Otherwise  a  continuation  of  inadequate  trans- 
portation facilities  will,  as  certainly  as  night  follows 
day,  "place  an  arbitrary  limit  upon  the  future  pro- 
ductivity of  the  land."  This  was  the  anxious  utterance 
of  the  Interstate  Commerce  Commission  in  1907,  and  is 
the  present  concern  of  every  thoughful  student  of  the 
situation. — Darius  Miller:  World  Today,  December, 

1910. 

/ 

Cost  of  Regulation 

Now  all  of  this  regulation  costs  a  good  deal  of 
money,  and  in  these  days  of  great  governmental  ex- 
pense it  would  seem  wise  to  pause  a  little  and  make 
certain  that  the  very  best  use  of  the  tax-payers'  money 
is  being  made.  For  example :  The  Commerce  Commis- 
sion cost  the  country  in  1888  $97,867,  but  in  1910  it 
cost  14  times  as  much,  or  $1,385,000.  The  State  Com- 
missions of  Wisconsin,  Minnesota,  North  Dakota,  Mon- 
tana, Washington,  and  Oregon  cost  in  1909  $266,718.70, 
or  an  average  of  $44,450.  Using  this  average  for  the 
States  west  of  the  Mississippi  River  having  commis- 
sions, gives  a  total  expenditure  of  $844,550  a  year. 

Recently  the  owners  of  the  Mipnesota  railroads  were 
obliged  to  appeal  to  the  courts  to  decide  whether  laws 
and  orders  affecting  the  earning  power  of  their  prop- 
erties were  just,  and  that  case  is  still  pending.  The 
total  cost  of  preparing  for  and  trying  that  case  to  the 


140 


State  and  to  the  railroad  stockholders  will  be  more 
than  $400,000.  The  extra  cost  to  the  railroads  of 
the  United  States  by  what  in  many  cases  seems  to  be 
excessive  and  unnecessary  regulation  is  estimated  to 
be  about  $85  per  mile  of  road  per  annum,  or  nearly 
$20,000,000  per  year. — Howard  Elliott:  Address  be- 
fore the  Minnesota  Federation  of  Commercial  Clubs, 
in  annual  convention,  St.  Paul,  Minn.,  January  26, 
1911. 

Ample  Machinery  for  Regulation 

There  can  no  longer  be  any  doubt  that  the  public 
has  ample  and  efficient  machinery  for  the  thorough 
control  and  regulation  of  the  railroads.  We  have  not 
only  a  Federal  Commission  in  Washington  which  has 
been  granted  the  widest  possible  powers  to  regulate 
and  supervise,  but  we  have  also  commissions  in  nearly 
all  of  the  individual  States,  with  powers  relatively  as 
great  as  those  delegated  to  the  Federal  body.  The 
Interstate  Commerce  Commission  is  empowered  to 
prescribe  the  manner  in  which  the  railroad  accounts 
shall  be  kept,  even  to  the  minutest  detail,  and  the 
roads  are  now  keeping  their  accounts  in  harmony 
with  the  requirements  of  the  Commission.  It  is  also 
provided  by  law,  under  penalty  of  heavy  fine  and  im- 
prisonment, that  no  discrimination  shall  be  shown 
either  with  reference  to  rates  paid  or  service  given,  as 
between  individuals  or  communities. 

It  has  come  to  be  understood  that  the  railroad  is  a 
semi-public  institution,  and  that  it  is  expected  to 
treat,  and  must  treat,  all  with  equal  fairness.  The 
executives  in  charge  of  the  railways  by  virtue  of 
what  has  come  about,  occupy  the  dual  position  of  semi- 
public  officers,  charged  with  the  duty  of  operating  the 
properties  in  harmony  with  the  laws  of  the  country, 
and  also  with  the  equally  important  duty  of  trustee, 


141 


representing  those  whose  money  is  invested  in  the 
enterprise.  It  should  be  remembered  that  although 
the  railroad  is  considered  a  public  utility  with  im- 
portant public  functions  to  perform,  it'  nevertheless 
owes  its  very  existence  to  the  employment  of  private 
capital. — Daniel  Willard:  Before  the  Boston  Chamber 
of  Commerce,  June  12,  1913. 

Ignorance  and  Legislation 

The  average  critic  of  railroad  management,  be  he 
legislative  or  journalistic,  spends  one  day  or  two  in- 
vestigating transportation  problems  that  three  genera- 
tions of  shippers  and  railway  employees  and  managers 
have  struggled  with.  After  a  session  of  an  hour  with 
himself  and  a  study  of  magazine  and  newspaper  clip- 
pings, he  formulates  solutions  that  he  hopes  may  be 
accepted  by  the  public.  He  never  had  charge  of  a 
train  in  face  of  a  mile  washout  in  a  storm,  with  an 
ax,  a  crowbar,  and  a  lantern,  to  make  repairs.  He 
knows  nothing  of  the  game  of  chess  involved  in  keep- 
ing a  dozen  trains  of  constantly  varying  speed  capaci- 
ties moving  on  a  single  track;  over  a  mountain  top, 
against  another  dozen  to  be  kept  moving  in  the  oppo- 
site direction. 

But  in  an  hour's  speech  he  can  tell  you  that  the 
railroad  must  be  made  to  move  its  freight  with  un- 
varying expedition,  or  suffer.  He  does  not  consider 
that  a  railroad  has  not  the  slightest  control  over  the 
destination  of  its  own  cars  or  the  cars  in  its  service. 
He  does  not  realize  that  the  shipper  says  where  these 
cars  shall  go  and  gives  them  destinations  all  over  the 
United  States,  and  that  the  cars  received  by  the  road 
are  largely  dependent  upon  the  directions  of  shippers 
in  other  sections  of  the  country,  maybe  thousands  of 
miles  away. 


142 


It  is  from  such  authorities  that  the  general  public 
have  formed  their  conceptions  of  the  railroad  business, 
its  evils  and  its  remedies.  And,  more  unfortunate 
still,  too  many  of  those  same  ideas  have  crystallized 
themselves  into  legislative  enactments  that  hinder 
instead  of  heal  transportation  hurts. — W.  L.  Ross: 
Address  'before  American  Association  of  Local  Freight 
Agents'  Associations,  Toledo,  June  16,  1908. 

Too  Many  State  and  National  Laws 

Every  Anglo-Saxon  community  likes  fair  play,  and 
as  within  the  last  eight  years  there  have  been  passed 
about  1,800  State  and  National  laws  for  the  regula- 
tion of  almost  every  detail  of  the  railway  business, 
there  has  been  spreading  among  the  people  a  feeling 
that  the  roads  ought  to  be  given  a  rest. — 8.  O.  Dunn, 
American  Railway  Number  of  the  London  Times,  June 
28,  1912, 

How  the  Eailroad  is  Tied 

The  high  cost  of  living  during  the  last  few  years  has 
pinched  the  railways  more  severely  than  any  other 
branch  of  business.  Everything  that  the  railway  uses 
has  gone  up,  from  the  wages  of  the  office  boy  to  the 
price  of  locomotives;  but  the  one  thing  that  has  re- 
mained stationary  has  been  the  cost  of  transportation. 
The  railway  is  just  like  a  merchant;  it  has  something 
to  sell  to  the  public.  But  there  is  this  difference 
between  the  railway  and  the  merchant.  If  the  mer- 
chant has  to  pay  more  for  his  goods  because  the  wages 
of  the  men  who  make  the  articles  that  he  sells  have 
increased,  and  the  price  of  raw  materials  has  ad- 
vanced, the  salesmen  and  bookkeepers  ask  more  money, 
and  the  landlord  thinks  his  store  is  worth  more  this 


143 


year  than  It  was  last,  and  more  men  have  been  ap- 
pointed on  the  police  force  and  in  the  fire  department, 
making  taxes  heavier,  why,  the  merchant  simply 
charges  more  for  his  goods,  whether  it  be  coffee  or 
calico,  beans  or  beef.  And  he  can  do  this,  because  every 
other  merchant  is  in  the  same  boat.  Manufacturing 
costs  more  this  year  than  last,  and  the  retailer  has  to 
pay  the  difference;  so  the  retailer  puts  the  burden  on 
the  public,  the  ultimate  consumer.  The  railway  can- 
not do  this,  because  it  is  not  permitted  to  charge  what 
it  pleases  for  its  Cervices.  It  is  under  the  control  of 
State  and  Federal  laws ;  its  rates  for  the  transporta- 
tion of  passengers  and  freight  are  subject  to  the  ap- 
proval of  local  or  national  authorities. — A.  Maurice 
Low,  Harper's  Weekly,  August  31,  1912. 

The  Scheme  of  Legislation 

The  public  service  in  which  the  carrier  engages  is 
undertaken  for  private  gain;  the  shipper  avails  him- 
self of  this  public  service,  likewise  for  private  gain. 
The  selfishness  of  human  nature  is  on  both  .sides  of 
the  transaction.  Now  the  object  of  legal  regulation  is 
to  hold  these  opposing  forces  in  stable  equilibrium,  to 
reduce  contests  and  complaints  to  a  minimum,  and  to 
bring  the  dealings  between  shipper  and  carrier  under 
the  control  of  mutual  justice.  The  sufficient  scheme 
of  legislation,  therefore,  will  recognize  the  possibility 
of  wrong-doing  on  one  side  as  well  as  the  other:  it 
will  be  judicial  rather  than  partisan  in  its  aims  anu 
requirements,  and  while  equipping  the  shipper  with 
ample  protection  will  also  furnish  the  carrier  with 
all  needful  defenses. — Martin  A.  Knapp:  Principles  oj 
Railway  Legislation.  Address  before  the  Railway 
Congress  Auxiliary  of  the  World's  Columbian  Exposi- 
tion, June  23,  1893. 


144 


Railroads  and  Other  Industries 

It  may  be  well  to  examine  the  case  of  railway 
securities,  which  form  so  large  a  part  of  the  people's 
investments.  The  ability  of  the  railways  to  pay  a 
legitimate  dividend  on  capital  is  as  essential  to  the 
maintenance  of  transportation  of  persons  and  goods — 
one  of  the  most  necessary  services  required  by  soci- 
ety—  as  is  the  payment  of  wages  to  their  employees. 
At  the  bottom  of  a  just  policy  toward  railways  is  the 
right  to  the  same  treatment  that  is  accorded  to  other 
industries,  such  as  agriculture,  mining,  or  manufac- 
turing— except  so  far  as  it  is  necessary  to  take  into 
account  their  quasi-public  character.  As  quasi-public 
corporations,  railways  must  submit  to  that  kind  of 
supervision  by  the  public  which  will  ensure  equality 
of  service  and  the  same  rates  to  all.  But  beyond  that, 
the  railway  should  not  be  singled  out  for  crippling  and 
special  attacks  any  more  than  an  iron  furnace  or  a 
shoe  factory.  Yet  because  of  the  psychological  condi- 
tions above  described,  the  ambitious  politician  wins 
votes  by  "baiting"  the  railways  and  large  industrial 
organizations.  Therefore  it  is  well,  as  in  the  recent 
election,  to  drive  the  cows  out  of  the  garden.  The 
need  in  Congress  is  for  men  who  are  not  representa- 
tives of  special  interests,  but  who  will  take  into  their 
purview  the  interests  of  all  who  are  affected  by  the 
problem. — James  Laurence  Laughlin:  The  People's  In- 
vestments in  Railways.  Address  at  the  fourth  annual 
meeting  of  the  As,sociation  of  Life  Insurance  Presi- 
dents, at  Chicago,  Illinois,  Saturday,  December  10, 
1910. 


145 

Excess  of  Regulation 

The  country  is  suffering  from  an  excess  of  railroad 
regulation.  Much  of  it  is  ill-considered.  In  many 
cases  the  remedies  are  worse  than  the  evils  they  are 
designed  to  cure.  We  have  seen  that  the  best  remedy 
for  over-capitalization  due  to  insufficiency  of  earnings 
to  pay  fixed  charges  and  return  on  the  capital  stock 
lies  in  the  growth  of  the  volume  of  the  traffic.  In 
such;  cases  a  restriction  of  the  issue  of  stock  cannot 
affect  its  intrinsic  value. — Henry  Fink:  Federal  Regu- 
lation of  Railroad  Securities  and  Valuation  of  Rail- 
road Properties. 

A  Better  Understanding 

With  a  proper  exercise  of  the  large  experience  and 
recognized  ability  possessed  by  railway  managers,  and 
public  discussions  which  will  lead  to  a  better  knowl- 
edge of  the  subject,  there  are  good  reasons  to  believe 
that  a  better  understanding  will  be  reached  between 
legislators,  shippers,  and  railway  companies,  and  that 
methods  will  be  introduced  which  will  be  for  the  good 
of  all  and  end  the  possibility  of  further  warfare.  If 
unremunerative  rates  are  forced  upon  the  railways, 
they  will  unquestionably  lead  to  a  deterioration  of 
the  service  and  the  impossibility  of  raising  money  to 
build  necessary  extensions  and  create  new  roads. 
Capital,  which  furnishes  the  sinews  of  all  business, 
will  shun  localities  which  render  investments  un- 
profitable, disbursements  will  be  smaller,  the  pur- 
chasing power  of  customers  will  be  reduced,  and 
every  branch  of  trade  will  feel  the  evil  effects.  It  is 
a  sound  axiom  that  whatever  injures  a  part,  injures 
the  whole,  and  no  one  great  industry  of  the  country 


146 


can  suffer  without  others  suffering  in  some  degree.  — 
Horace  Porter:  Railway  Rates.  North  American  Re- 
view, December, 


Creation  of  Permanent  Conditions 

Vast  areas  of  country  upon  the  American  continent 
yet  remain  to  be  developed.  Great  sections  of  the 
West,  Northwest,  Southwest,  and  South  have  only 
fairly  begun  what  will  be  their  ultimate  development. 
A  railroad's  facilities  for  meeting  these  demands  of 
the  coming  years  must  be  planned  for  long  in  advance. 
This  is  a  strong  argument  for  the  stability  of  govern- 
ment regulation.  In  the  coming  ten  years  at  least 
100  per  cent  more  traffic  must  be  handled  than  in  the 
ten  years  that  have  just  passed,  and  all  reasonable 
regulation  should  have  in  mind  the  creation  of  per- 
manent conditions  that  will  enable  the  railroads  to 
meet  these  demands  that  are  to  come  to  them. 

•Conditions  must  be  maintained  and  created  that 
will  give  the  railroads  the  money  to  carry  on  this 
development.  —  W.  L.  Ross:  Address  at  meeting  of 
Traffic  Club  of  Philadelphia,  February  17,  1912. 

Limits  of  Governmental  Regulation 

As  a  railway  is  a  public  highway,  it  is  a  proper 
function  of  the  Government  to  protect  all  travelers 
and  shippers  from  undue  discriminations  in  charges 
or  in  service  when  the  service  is  performed  under  sub- 
stantially similar  circumstances  and  conditions.  As 
the  operating  company  must  exercise  a  monopoly  of 
transportation  over  this  highway,  it  is  a  proper  func- 
tion of  the  Government  to  prevent  unreasonable  or  ex- 
tortionate charges  for  the  service  performed. 

Neither  as  a  matter  of  sound  economics  nor  of 
soand  public  policy  can  governmental  regulation  of 


147 

the  railways  be  carried  beyond  these  limits,  and  It  is 
to  the  interest  of  the  business  man  that  it  should  not 
be.  It  is  to  his  interest  that  the  railway  should  re- 
ceive just  and  reasonable  compensation  for  each  spe- 
cific service  which  it  performs,  as  it  is  only  in  this 
way  that  railway  credit  can  be  maintained  and  ade- 
quate facilities  be  provided.  It  is,  1  believe,  a  prop- 
erty right  in  which  a  privately  owned  railway  is  pro- 
tected by  the  Constitution  of  the  United  States  to  re- 
ceive just  and  reasonable  compensation  for  each  spe- 
cific service  performed,  and  I  believe  that  it  is  to  the 
ultimate  interest  of  the  business  man  that  the  rail- 
ways should  be  protected  in  this  right  rather  than 
that  by  the  exercise  of  governmental  authority  their 
revenues  should  be  so  reduced  as  to  restrict  the  value 
of  capital  in  railway  enterprises. — William  W.  Finley, 
at  Alexander  Hamilton  Institute,  New  York  City, 
1911. 

Too  Many  Laws 

Today  on  all  important  questions  but  one  the  rail- 
way owner  is  directed  by  acts  of  Congress,  of  State 
legislatures,  and  by  the  orders  of  commissions  and 
bureaus.  He  has  little  control  over  the  rates,  over 
the  hours  of  labor,  over  the  rules  for  the  conduct  of 
the  business  in  which  his  money  is  invested,  over  the 
taxes  he  shall  pay.  There  is  reserved  to  him  the  one 
duty  and  responsibility  of  finding  money  to  pay  the 
bills. 

The  Congress,  the  legislatures,  the  commissions  and 
bureaus  may  pass  laws  and  issue  orders  and  the  rail- 
way will  obey  them  when  they  understand  them  and 
If  they  are  constitutional  and  until  they  are  exhausted. 
But  there  is  one  great  fact  that  cannot  be  changed 
by  legislative  fiat  or  commission  decree — and  that  Is 
you  cannot  make  a  man  invest  his  money  in  railways 


148 


unless  he  wants  to — Howard  Elliott:  Address  at  the 
Third  National  Apple  Show,  Spokane,  Washington, 
November  14,  1910. 

Inherent  Rights  of  the  Railroads 

As  we  have  seen,  the  popular  and  legal  conception 
of  the  relations  of  the  railroads  to  the  government  has 
undergone  marked  changes  and,  as  we  all  know,  there 
is  a  possibility  of  still  more  radical  change.  The  era 
of  corporate  amalgamation  marks  a  transition  in  the 
industrial  and  commercial  status  which  has  found 
effect  in  modifications  of  the  laws.  As  the  problems 
developed  by  this  period  of  transition  are  not  as  yet 
thoroughly  understood,  the  laws  to  which  they  have 
given  rise  are  as  yet  incoherent. 

Inasmuch  as  the  railroads  of  this  country  have  been 
constructed  and  maintained  by  private  capital  that 
capital  must  be  protected  in  the  rights  inherent  in 
property.  To  do  otherwise  would  impede  their  opera- 
tion, impair  their  maintenance,  and  obstruct  their  de- 
velopment. There  is  but  one  way  in  which  the  obli- 
gation of  the  government  to  the  railroads  as  private 
property  can  be  removed,  and -"that  is  through  their 
purchase  by  the  government.  The  experience  of  other 
countries  in  the  ownership  and  administration  of  the 
railroads  is  sufficient  to  give  the  people  of^the  United 
States  a  long  pause  before  taking  this  stejv 

That  private  property  must  be  used  for  the  public 
good  applies  with  redoubled  force  to  the  railways. 
This  does  not  mean,  however,  that  their  public  rela- 
tions may  be  considered  a  basis  for  their  oppression 
by  the  public  any  more  than  their  status  as  private 
property  can  be  made  the  basis  for  oppression  of  the 
public  by  them. — Logan  O.  McPherson:  Lecture  under 
auspices  of  the  College  of  Arts  and  Sciences,  Cornell 
University,  May  13,  1912. 


149 


Why  Not  Regulate  These? 

Two  hundred  and  twenty-one  persons  killed  in  New 
York  city  during  the  year  1912  by  automobiles;  355 
by  automobiles  and  street  cars;  135  passengers  killed 
on  all  the  railroads  in  the  United  States. 

Why  not  regulate  the  autos  and  street  cars.  Rail- 
ways are  entitled  to  a  rest. — Railway  Record,  March  8, 
1913. 

Effect  of  Radical  Legislation 

One  reason,  perhaps,  why  there  has  been  some  hesi- 
tation in  the  growth  of  Minnesota  is  that  the  State 
has  been  rather  extreme  in  the  past  about  legislation 
affecting  the  transportation  business.  The  feeling 
that  the  State  is  somewhat  inclined  to  extreme  legis- 
lation has  had  a  tendency  to  keep  capital  away.  Some 
regulation  is  necessary  and  desirable  in  our  modern, 
complex  industrial  system ;  but  during  the  last  few 
years  regulation  has  too  often  been  interpreted  by  the 
ambitious  law-maker  or  the  active  railroad  commis- 
sioner to  mean  the  taking  away  of  something  from 
some  one  else,  whether  such  act  was  just  or  not. 
Prices  of  commodities  and  railroad  rates  cannot  be 
handled  on  a  rigid  arithmetical  basis,  with  no  elas- 
ticity, and  there  has  not  been  enough  statesmanship 
and  every-day  common  sense  in  connection  with  at- 
tempts made  to  regulate  and  manage  business  by 
statute.  Commissioners  and  legislatures  should  have 
before  them  always  the  question,  "What  is  best  for  all 
the  people,  including  the  owners  and  employees  of 
railroads?"  and  not  the  question,  "Can  the  railroads 
stand  another  reduction  in  rates  without  the  courts 
stepping  in  to  prevent  confiscation?" 


150 


Every  legislator,  every  commissioner,  and  every, 
right-minded  man  should  remember  the  words  of 
Chief  Justice  Waite,  of  the  United  States  Supreme 
Court,  who  said:  "This  power  to  regulate  rates  is  not 
a  power  to  destroy,  and  limitation  is  nojfc  equivalent 
to  confiscation  under  pretense  of  regulating  fares  and 
rates.  The  State  cannot  require  a  railroad  corpora- 
tion to  carry  persons  or  property  without  reward. 
Neither  can  it  do  that  which  in  law  amounts  to  the 
Baking  of  private  property  for  public  use  without  just 
compensation  or  without  due  process  of  law." — How- 
ard Elliott:  Address  before  the  Minnesota  Federation 
of  Commercial  Clubs,  in  annual  convention,  Saint 
Paul,  Minnesota,  January  26,  1911. 

Proof  of  Experience 

There  should  be  great  care  in  experimenting  with 
regulation  that  offers  as  warrant  of  its  effectiveness 
the  arguments  of  theorists  rather  than  the  practical 
proof  of  experience.  Among  the  proposals  thus  to  be 
tested  is  the  one  for  Federal  limitation  of  the  capital- 
ization of  interstate  corporations.  If  the  purpose  and 
effect  of  such  action  is  to  invalidate  in  the  courts  or 
to  depreciate  in  the  exchanges  what  are  now  de- 
nounced as  watered  securities,  the  blow  will  fall  not 
on  the  persons  responsible  for  their  creation,  but  on 
the  victims  who  parted  with  money  to  acquire  them. 
Such  an  act  of  vicarious  punishment  could  only  be 
justified  by  the  unquestioned  conviction  that  the  con- 
tinued existence  of  the  assailed  securities  is  a  menace 
to  the  public  welfare.  The  only  ground  for  such  be- 
lief is  the  unfounded  fallacy  that  the  amount  of  se- 
curities outstanding  against  a  railroad  property  deter- 
mines the  rates  it  charges  for  transportation.  The 
sufficient  answer  to  this  is  the  fact  that  the  Union 


151 


Pacific  Railroad,  with  capitalization  of  $92,000  per 
mile  of  road,  competes  very  comfortably,  and  upon 
oqual  rates,  with  the  Atchison,  capitalized  at  $50,298 
per  mile,  and  with  the  Great  Northern,  whose  capital- 
ization is  $42,350  per  mile.  And  the  same  rates  be- 
tween the  same  points  serve  for  the  Illinois  Central, 
whose  capital  is  $56,495  per  mile ;  the  Eastern  Illinois, 
with  $62,599,  and  the  Alton,  with  nearly  $115,000  per 
mile. — Robert  MatJier:  The  Railroad  Problem.  Ad- 
dress before  Chicago  Association  of  Commerce,  Octo- 
ber 12,  1907. 

Why  New  Railroads  Are  Not  Being  Built 

Mr.  Untermyer:  Do  you  attribute  the  absence  of 
competing  railroad  building  as  against  the  great  sys- 
tems to  the  dominance  of  the  banking  interests  in 
those  great  railroad  systems? 

Mr.  Morgan:  I  do  not. 

Mr.  Untermyer:  You  do  not?  Do  you  attribute  it 
to  the  fact  that  in  this  comparatively  new  and  grow- 
ing country  there  is  not  any  need  for  any  more  rail- 
roads? 

.Mr.  Morgan:  I  do  not. 

Mr.  Untermyer :  Do  you  attribute  it  to  the  difficulty 
of  getting  new  capital? 

Mr.  Morgan:  I  do. 

Mr.  Untermyer:  For  competing  systems? 

Mr.  Morgan :  I  do.  I  might  add  to  my  reply,  if  you 
will  allow  me  to 

Mr.  Untermyer:  Yes. 

Mr.  Morgan  (continuing)  :  That  I  think  it  is  owing 
in  large  measure  to  the  fact  of  the  want  of  prptection 
against  railroads  that  has  been  current  in  this  country 
for  the  last  ten  years. 


152 

Mr.  Untermyer :  You  mean  the  want  of  protection  to 
the  railroads? 

Mr.  Morgan :  To  the  railroads ;  yes.  Nobody  wants 
to  put  money  into  a  new  railroad  in  these  times. — 
Money  Trust  Investigation,  December  19,  1912. 

A  New  Account  with  the  Future 

I  assume  we  are  all  equally  interested  in  the  pros- 
perity of  our  country  as  a  whole.  We  cannot  have 
such  prosperity  as  we  all  desire  while  the  second 
largest  industry  in  the  land,  measured  by  capital  in- 
vestment, remains  inert.  I  positively  know  that  there 
is  today  in  the  minds  of  railroad  managers  a  feeling 
of  hesitancy,  of  uncertainty,  as  regards  the  future. 
Possibly  that  feeling  is  not  justified  by  the  facts,  by 
the  conditions.  Possibly  the  managers  are  mistaken. 
None  the  less,  the  feeling  is  there  and  it  is  dominating 
the  situation,  and  the  all-important  question  is,  How 
can  it  be  corrected?  How  can  the  feeling  of  distrust, 
which  now  rightly  or  wrongly  so  powerfully  influences 
the  policy  of  the  railroads,  be  allayed?  I  should  say 
by  removing  the  cause,  and,  unless  I  have  altogether 
failed  to  make  clear  what  is  in  my  mind,  I  think  the 
cause,  as  I  view  it,  should  be  apparent;  but,  to  i>e 
more  specific,  let  the  people  who  use  the  roads  and 
want  the  roads  now  indicate  that,  having  secured  the 
enactment  of  such  laws  as  they  considered  necessary 
in  order  to  correct  the  conditions  complained  of  in  the 
past,  they  are  now  willing  (as  I  think  they  should  be) 
to  open  a  new  account  with  the  future.  Let  them 
show  that  they  are  willing,  as  I  believe  they  are,  that 
the  roads  should  be  treated  fairly;  they  are  entitled 
to  nothing  more,  they  should  receive  nothing  less.  Let 
them  consider  each  new  proposal  for  legislation  with 
entire  freedom  from  any  spirit  of  retaliation,  I  do 


153 


not  say  that  it  is  necessary  to  undo  anything  already 
done  (although  experience  may  show  such  action  to  be 
wise  in  some  instances),  but  I  do  say  that  the  rail- 
roads should  be  given  a  respite  from  further  legisla- 
tion— State  or  Federal — for  a  time  at  least  and  until 
they  can  work  out  some  of  the  many  new  and  com- 
plex problems  now  confronting  them.  If  such  a  course 
should  find  favor  in  the  minds  of  the  people  and  be 
reflected  in  their  attitude  towards  the  carriers,  I  do 
not  hesitate  to  say  that  the  patient  now  indisposed 
would  immediately  show  signs  of  convalescence. — 
Daniel  Willard:  Address  at  annual  dinner  of  Railway 
Business  Association,  New  York,  November  22,  1910. 


Cost  of  Regulation 

The  effect  of  governmental  regulation  is  much  more 
apparent  in  railroad  operation  than  in  private  indus- 
tries, and,  while  both  proper  and  desirable,  it  adds  to 
the  cost  of  operation.  Mr.  Howard  Elliott,  president 
of  the  Northern  Pacific  Railway,  recently  [January  26, 
1911,3  stated  that  the  cost  to  the  railroads  of  the 
United  States  for  board  and  commission  control 
amounts  to  $85  per  mile  of  road  per  annum,  an  aggre- 
gate of  $20,000,000.  This  regulation  affects  nearly 
every  detail  of  operation.  Though  justified  by  public 
policy  and  apparently  necessary  to  keep  all  the  rail- 
roads up  to  a  standard  which  the  well  managed  might 
adopt  without  governmental  requirement,  it  has  an  im- 
portant bearing  on  any  comparison  which  may  be  made 
between  railroads  and  manufacturing  establishments 
not  so  circumscribed. — William  J.  Cunningham:  Scien- 
tific Management  in  the  Operation  of  Railroads.  Quar- 
terly Journal  of  Economics,  May,  1911. 


154 


A  Conservative,  Wise,  Just  Policy 

Fair  and  intelligent  consideration  would  result  in 
the  concentration  of  authority  over  the  railways  in 
the  hands  of  the  Interstate  Commerce  Commission 
and  the  abolition  or  subordination  to  the  Interstate 
Commission  of  the  numerous  State  commissions,  with 
their  multitudinous,  conflicting,  vexatious,  and  costly 
requirements.  It  would  result -in  the  appointment  of 
well-paid  experts  and  scientists,  both  to  membership 
on  the  commissions,  and  to  the  various  important  and 
responsible  positions  under  them.  It  would  result  in 
public  authorities  ceasing  to  try  to  substitute  them- 
selves for  the  managers  of  the  railways,  and  becom- 
ing content  to  perform  their  proper  duty  of  holding 
the  managers  responsible  for  the  effects  of  their  man- 
agement on  the  public  interests.  It  would  result  in 
no  diminution  of  the  efforts,  growing  every  day 
more  successful,  to  suppress  all  forms  of  unfair  dis- 
crimination by  railways;  but  it  would  result  in  a 
diminution  of  the  incessant  and  successful  efforts  to 
hold  down  railway  profits — efforts  which  are  repelling 
capital  from  the  railway  business,  and,  by  preventing 
adequte  increases  of  facilities,  imperiling  the  welfare 
of  every  manufacturer,  every  merchant,  every  farmer, 
every  wage-earner,  in  the  country.  One  thing  is  cer- 
tain, and  that  is  that  we  cannot  long  continue  to  mud- 
dle along  as  we  are  doing  now.  W.  M.  Acworth,  the 
eminent  English  authority  on  railway  affairs,  after  a 
visit  to  this  country,  said  in  an  article  published  last 
autumn  in  the  Bulletin  of  the  International  Railway 
Congress: 

"If  I  have  an  individual  belief  it  is  that  the  Unked 
States  will  get  much  nearer  to  the  brink  of  nationali- 
sation than  they  have  come  at  present,  and  will  then 


155 

start  back  on  the  edge  of  the  precipice,  and  escape  by 
some  road  not  yet  discernible." 

The  best  road  by  which  we  may  escape  is  a  con- 
servative, wise,  just  policy  of  regulation;  and  the 
most  vital  question  of  our  time  is  whether  the  people 
of  the  United  States  will  be  just,  wise,  and  conserva- 
tive enough  to  take  that  road. — B..  L.  Winchell:  At- 
lantic Monthly,  December,  1912. 

The  Flood  of  Legislation 

The  disposition  to  try  to  adjust  everything  by  pass- 
ing laws  is  nowhere  more  strikingly  shown  than  in 
the  number  of  laws  introduced  into  Congress.  While 
the  largest  number  of  proposed  enactments  submitted 
to  any  American  Congress  during  the  ten-year  period 
ending  in  1909  was  at  the  sixtieth  session,  when 
38,388  bills  were  introduced,  the  more  deliberate  and 
careful  methods  of  the  English  are  shown  in  the  fact 
that  the  largest  number  of  bills  before  any  Parlia- 
ment in  that  period,  that  of  1900,  was  only  621.  Less 
than  2  per  cent  of  the  bills  before  the  sixtieth  Con- 
gress became  law,  while  67  per  cent  of  the  bills  pro- 
posed in  Parliament  in  1900  were  enacted. 

During  this  ten-year  period  our  National  Senate 
and  House  considered  146,471  different  bills.  During 
the  same  period  the  English  Parliament  considered 
but  6,251  measures.  The  Congressional  "mill"  added 
15,782  measures  to  the  law  of  the  land;  Parliament 
enacted  but  3,822  new  laws.  The  figures  in  both  in- 
stances include  both  public  and  private  bills,  and  it 
should  be  added  that  Parliament  considers  and  acts 
upon  many  subjects  which  are  considered  by  State 
and  municipal  bodies  in  the  United  States. 

The  State  legislatures  for  1911  considered  as  a  part 
of  new  railroad  legislation  proposed,  a  total  of  512 


156 


bills,  affecting  physical  operation  of  railroads.  These 
proposed  bills  related  to  hours  of  service,  terms  of 
employment,  the  kind  of  uniforms  to  be  worn,  and 
other  matters  affecting  employees,  compulsory  and 
voluntary  arbitration,  train  rules,  regulations  for  the 
operation  of  freight  and  passengers  trains,  equipment, 
car  supply  and  claims,  signals,  clearances,  crossings, 
maintenance  of  tracks,  and  many  details  which  it 
would  be  supposed  that  the  long  experience  and  ex- 
tensive knowledge  of  railroad  managers  under  the 
varying  conditions  of  business  would  be  a  better  guide 
than  the  judgment  of  a  legislative  body,  no  matter 
how  excellent  its  intentions. — Howard  Elliott:  Public 
Opinion;  Its  Effect  on  Business.  Address  before  the 
Publicity  Club  of  Minneapolis,  Minnesota,  January  10, 
1912. 


CAPITAL  AND  CREDIT. 


Railways  Must  Have  Adequate  Capital 

Without  regard  to  the  personnel  of  railroad  officials, 
without  regard  primarily  to  the  interest  of  stockhold- 
ers, but  in  the  interest  of  public  welfare  and  national 
prosperity,  we  must  permit  railroad  earnings  to  be 
adequate  for  railway  improvement  at  advantage  and 
profit. 

The  prosperity  of  the  country  is  measured,  and  will 
be  measured,  by  the  ability  of  its  railways  and  water- 
ways to  transport  its  increasing  commerce.  With  a 
country  of  such  vast  extent  and  limitless  resources, 
with  all  the  means  of  production  developed  to  a  won- 
derful state  of  efficiency,  the  continued  advancement 
of  this  great  people  depends  primarily  upon  such  an 
increase  of  transportation  facilities  as  will  provide 
prompt  and  safe  movement  everywhere  from  producer 
to  consumer;  and  that  we  shall  not  secure  unless  the 
men  who  are  relied  upon  to  manage  these  great  high- 
ways of  commerce  have  fitting  opportunity  and  the 
capital  which  is  required  for, their  needful  expansion 
is  permitted  to  realize  fairly  liberal  returns. — Martin 
A.  Knapp,  late  Chairman  of  the  Interstate  Commerce 
Commission. 

Way  to  Strengthen  Railway  Credit 

The  Interstate  Commerce  Commission  in  1907  de- 
clared that  the  inadequacy  of  transportation  facilities 
was  alarming,  yet  when  the  railroads  sought  to  ad- 

157 


158 


vance  their  rates  in  1910  to  enable  them  to  make  bet- 
ter provision  for  the  public  demands  and  establish  a 
higher  financial  credit,  the  Commission  would  not 
sanction  the  advance.  The  earnings  for  the  roads  for 
the  two  following  years,  1911  and  1912,  increased 
$11,054,000,  but  the  operating  expenses  and  taxes  were 
swelled  $98,544,000,  leaving  a  less  net  revenue  for 
1912  than  for  1910  by  $87,490,000.  This  loss  was 
equivalent  to  the  impairment  of  their  ability  to  raise 
over  $2,187,000,000  at  4  per  cent.  It  is  thus  that  the 
net  revenues  of  the  railroads  are  depleted  and  their 
inability  to  borrow  money  is  further  emphasized.  If 
the  railroads  could  retrieve  such  yearly  net  losses, 
they  would  be  able  to  strengthen  their  credit  in  the 
financial  marts  and  raise  the  necessary  funds  to  meet 
the  exigent  demands  of  the  business  public. — Benja- 
min F.  Bush:  Before  the  Economic  Club,  "New  York, 
April  29,  1913. 

Value  of  Securities 

Of  course  the  value  of  corporate  securities  does  not 
depend  wholly  or  even  to  a  great  extent  upon  the 
money  originally  put  into  the  enterprise.  That  is 
only  one  of  many  factors.  Much  more  depends  upon 
foresight  or  good  fortune  in  location,  and  in  develop- 
ment and  management,  and  in  the  drift  of  population 
and  business  or  in  territorial  development.  But  the 
main  reason  why  there  is  so  little  imposition  or  fraud 
practiced  upon  investors  in  railroad  securities  is  the 
publicity  given  to  the  affairs  of  railroad  companies. 
This  came  originally  from  the  honesty  of  railroad 
managers,  either  from  instincts  of  honor  or  from  the 
necessity,  on  account  of  the  large  number  of  stock- 
holders, of  stating  fully  and  accurately  in  the  annual 
reports  to  the  stockholders  the  real  condition  of  the 


159 


corporation.  This  has  been  reinforced  in  recent  years 
by  legal  requirements.  The  greatest  value  of  the  In- 
terstate Commerce  Act,  in  «ny  judgment,  is  the  re- 
quirement of  accurate  and  intelligent  bookkeeping 
and  accounting  in  all  particulars,  and  in  the  publicity 
given  thereto.  Except  in  some  minor  matters  respect- 
ing depreciation  charges  and  the  classification  of  main- 
tenance charges,  betterments,  and  additions,  the  pres- 
ent system  of  railroad  accounting  as  prescribed  and 
enforced  by  the  Commission  is  well-nigh  perfect,  and 
affords  almost  complete  protection  to  the  investors 
against  fraud  and  imposition. — R.  S.  Lovett:  State- 
ment before  Railroad  Securities  Commission,  Decem- 
ber 21,  1910. 

Land  Grants 

There  is  no  doubt  that  the  benefits  received  by  the 
railroads  from  land  grants  have  been  smaller  than 
was  expected  when  they  were  so  eagerly  sought.  To 
the  States  immediately  concerned,  the  grants  have  in 
many  cases  caused  hardship.  Following  the  with- 
drawal of  large  tracts  of  lands  for  indemnity  purposes, 
construction  was  often  brought  to  a  halt  on  account 
of  bankruptcy,  and  the  result  was  that  no  railroad 
was  built,  and  the  State  was  left  with  a  smaller  popu- 
lation and  less  revenue  than  there  would  have  been 
had  the  grants  never  been  made.  Cases  of  this  sort 
were  not  at  all  infrequent  in  undeveloped  States  like 
Florida,  Arkansas,  and  Texas,  and  in  the  territories 
where  population  was  scant  and  products  limited.  Of 
all  the  railroads  in  Missouri  which  received  grants 
of  land,  a  single  one  obtained  any  real  aid  to  con- 
struction from  this  source.  In  some  instances  land 
grants  have  been  a  source  of  expense  rather  than  a 
benefit  to  railroads.  Admitting  that  some  great  specu- 


160 


lative  inducement  was  necessary  in  the  launching  of 
such  pioneer  ventures  as  the  construction  of  the  Illi- 
nois Central-Mobile  and/  Ohio  and  Central-Union 
Pacific  projects,  the  fact  that  some  railroads  have 
been  constructed  along  similar  routes  and  under  iden- 
tical conditions  without  the  aid  of  grants  of  land 
points  to  the  conclusion  that  the  system  of  land  sub- 
sidies was  not  an  indispensable  accompaniment  of 
railroad  construction  in  the  West.  When  the  grants 
have  proved  of  service,  it  has  generally  been  not  at  a 
time  when  their  aid  was  most  urgently  needed,  but 
after  the  initial  stage  of  development  had  been  passed 
by  means  of  loans  of  public  credit  and  the  investment 
of  private  capital. — Cleveland  &  Powell:  Railroad  Pro- 
motion  and  Capitalization  in  the  United  States.  New 
York,  1909. 

Service,  Dividends  and  Prosperity 

As  the  preacher  says,  here  is  a  thought  which  I 
wish  you  to  take  home  with  you,  and  that  is  that 
every  statutory  regulation  which  either  improperly 
reduces  the  earning  capacity  of  the  railways  or  un- 
necessarily increases  the  cost  of  operating  them,  ren- 
ders them  just  that  much  less  able  to  serve  you  with 
due  dispatch  and  reasonable  and  increasing  safety. 
Adequate  and  efficient  railway  service  is  today  the 
first  necessity  of  every  class  of  business  men  in  the 
United  States,  and,  so  far  as  demonstrated  up  to  date, 
this  can  only  be  provided  by  profitable  railroads.  You 
know  better  than  most  people  in  this  country  the  dif- 
ference between  what  you  and  the  rest  of  the  public 
get  from  roads  which  pay  dividends  and  are  pros- 
perous, and  the  character  of  service  which  you  receive 
from  roads  which  continually  pile  up  deficits ;  but  the 
"strip  of  dividend  fat"  which  separates  the  profitable 


161 


from  the  unprofitable  American  railway  is  less  than 
4  per  cent  thick;  when  that  is  pared  away,  we  all 
suffer,  but  not  all  of  us  attribute  the  difficulty  to  the 
proper  and  right  reason. 

The  freight  rates  of  the  railways  are  guarded,  super- 
vised, and  restricted  almost  as  zealously,  in  most  of 
our  States,  as  the  rates  of  fare,  but  the  road  which 
makes  up  on  its  freight  traffic  what  it  loses  on  its  pas- 
senger business  is,  as  the  Wisconsin  Railway  Com- 
mission says,  "guilty  of  a  species  of  piracy  practiced 
upon  the  shippers  of  freight."  If  it  does  not  in  this, 
or  in  some  other  manner,  make  good  its  losses  in  pas- 
senger revenue,  the  result  must  be  either  deteriora- 
tion or  bankruptcy.  Bear  in  mind,  at  the  same  time, 
that  the  low  freight  rate  of  the  average  American 
railway  is  the  economic  wonder  of  the  world,  as  well 
as  the  economic  necessity  of  the  national  prosperity, 
which  is  dependent  upon  cheap  carriage — cheap  but 
safe  carriage — of  all  manners  of  commodities  with 
which  you  are  so  intimately  associated. — B.  L.  Win- 
chell:  Address  at  banquet  of  National  Association  of 
Commercial  Travelers,  Chicago,  July  27,  1909. 

Free  Play  for  the  Railroad  Builder 

The  great  factor  in  the  advancement  of  America  has 
been  the  free  play  given  for  individual  action.  If  at 
the  outset  we  had  tied  up  the  energies  of  men  by  stat- 
utes and  removed  the  spur  of  ambition  from  the  in- 
ventor, the  railroad  builder,  and  the  man  of  business, 
the  progress  of  our  country  would  have  been  far  less 
marked  than  it  has  been  during  the  last  century,  and 
the  progress  that  the  rest  of  mankind  has  gained 
under  the  influence  of  our  example  would  also  have 
been  less.  The  American  railroad  managers,  not 
through  altruism  or  philanthropy,  but  by  their  indi- 


162 


vidual  genius,  called  into  play  by  the  beneficent  influ- 
ence of  our  free  institutions,  have  been  working  out 
the  destiny  of  the  American  people.  They  have  helped 
powerfully  to  mold  a  vast  and  naturally  diverse  con- 
tinent into  one  people.  They  have,  in  a  double  sense, 
bound  together  the  most  remote  parts  of  the  country 
by  cords  of  steel.  They  have  interwoven  our  inter- 
ests and  our  hearts  inextricably  with  the  meshes  of 
the  iron  net.  And  if  they  are  to  receive  your  denun- 
ciation instead  of  your  gratitude,  then  there  is  no 
species  of  property  in  the  country  which  may  not  be 
plundered  by  law.  There  is  a  prescription  that  will 
almost  infallibly  work  in  forcing  through  such  legis- 
lation. Fiercely  denounce  some  Wall  Street  magnate 
by  name,  and  then  add  some  lurid  declamation  about 
insurance,  and  you  could  successfully  rob  any  business 
in  the  country  except  farming,  and  if  farmers  were 
not  so  numerous  they,  too,  would  not  escape. — Samuel 
W.  McCall:  Speech  in  House  of  Representatives,  Febru- 
ary 2,  1906. 


Backbone  of  Railroad  Credit 


j 


An  eminent  authority  has  stated,  and  very  properly, 
that  the  surplus  of  a  railroad  is  the  backbone  of  its 
credit.  The  surpluses  of  the  railroads  are  disappear- 
ing. When  under  schemes  of  regulation  severely  ap- 
plied the  surplus  of  a  railroad  disappears,  its  capacity 
for  extensions  and  improvements  stops,  because  what 
remains  represents  only  a  precarious  dividend.  The 
margin  between  that  dividend  and  the  interest  obliga- 
tion upon  the  bonds  is  too  narrow  to  enable  any  rail- 
road to  borrow  money  long  or  in  considerable  amount. 

It  has  been  widely  published  that  in  the  past  year 
the  Railroad  Commission  has  saved  two  million  dollars 
for  the  people  by  reducing  the  rates  of  the  railroads 


163 

within  this  State.  Accepting  that  statement  for  the 
present  purpose,  it  means  five  per  cent  on  a  borrowing 
capacity  of  forty  millions  of  dollars.  Which  is  more 
important  to  this  State,  that  forty  millions  be  spent  in 
the  increase  of  railroad  facilities  to  serve  San  Fran- 
cisco and  California,  or  that  the  railroads  have  two 
million  dollars  stricken  from  their  earnings?  I  would 
like  to  ask  any  one  in  this  room  whether  he  has  been 
benefited  in  his  own  business  to  any  appreciable  extent 
by  that  reduction.  It  would  be  interesting  if  every 
man  in  this  room  who  has  been  so  benefited  would 
rise  in  his  place ;  it  would  be  presumption  on  my  part 
to  ask  him  to  do  it.  If  it  were  fitting,  I  would  like  to 
ask  every  man  to  rise  in  his  place  who  believes  he 
would  be  benefited  by  the  expenditure  of  a  new  forty 
millions  of  dollars  in  railroad  improvements  and  con- 
struction in  this  State.  I  would  hazard  my  own  judg- 
ment on  your  answer. — Wm.  Sproule:  Address  at  the 
Annual  Dinner  of  the  Chamber  of  Commerce  af  San 
Francisco,  December  9,  1912. 

%        Few  New  Issues  of  Securities 

/  In  no  clearer  way  can  the  present  state  of  railway 
credit  be  set  forth  than  by  the  bare  statement  that  the 
railways  have  practically  stopped  offering  new  issues 
of  bonds  to  the  investment-buying  public.  With  traffic 
moving  in  the  greatest  volume  ever  known  and  railway 
facilities  very  much  curtailed  as  a  result  of  two  years 
of  enforced  economy,  there  is  every  reason  why  the 
railroads  should  be  in  the  market  for  funds.  But  such 
is  not  the  case.  Like  the  man  who  knows  that  his 
credit  isn't  good  and  so  very  wisely  keeps  away  from 
the  bank,  railway  finance  managers  are  very  wisely 
forbearing  to  ask  investors  to  subscribe  to  new  issues 
of  railway  securities. — Franklin  Escher,  North  Ameri- 
can Review,  February,  1913. 


104 


Labor's  View  of  a  Railway  Surplus 

A  surplus  should  be  accumulated  for  the  purpose  of 
maintaining  uniformity  of  dividends  over  periods  of 
industrial  or  commercial  depression,  for  meeting  un- 
foreseen and  heavy  expenses  such  as  those  growing 
out  of  the  lamentable  and  disastrous  floods  in  the 
Middle  West,  and  for  installing  improvements  such  as 
grade  crossings  or  track  elevations,  which  are  not 
immediately  productive,  or,  in  other  words,  do  not  add 
directly  to  the  earning  capacity  of  the  transportation 
companies.  Where  surplus  funds  are  used,  however, 
to  make  permanent  improvements  to  a  railroad  prop- 
erty, such  appropriations  should  be  considered  as  a 
distribution  to  stockholders  in  addition  to  regular  cash 
dividends.  The  surplus  or  deficit  of  an  individual 
railroad  also  has  no  significance,  as  already  pointed 
out,  unless  its  corporate  relations  are  considered. — 
W.  S.  Carter,  President  Brotherhood  of  Locomotive 
Firemen  and  Enginemen;  Brief  in  Arbitration  case, 
1912.  ^ 

Another  Labor  View  of  Surplus 

Railway  labor  does  not  begrudge — on  the  contrary, 
it  approves  of— proper  expenditures  out  of  income  for 
additions  and  betterments,  because  it  knows  that  these 
are  necessary  to  keep  pace  with  the  growing  demands 
of  traffic,  and  in  the  end  mean  higher  pay,  better  con- 
ditions and  greater  safety  for  the  employe's.  Besides, 
these  are  matters  that  concern  the  stockholders  and 
the  public  after  the  employes  wages  have  been  earned 
and  paid.  The  distribution  of  net  earnings  after  the 
payment  of  proper  operating  expenses,  taxes  and  in- 
terest charges  can  be  left  to  the  owners  of  the  prop- 
erties, under  the  watchful  supervision  of  the  Interstate 


165 

Commerce  Commission. — From  Minority  Report  of 
P.  H.  Morrissey,  representing  the  Brotherhood  of  Loco- 
motive Engineers  m  Arbitration  with  Eastern  Rail- 
roads. 

Railroads  and  the  Money  Market 

The  amount  of  profit  that  railroads  ought  to  be 
allowed  to  earn  should  be  treated  solely  as  a  matter  of 
expediency.  The  public  will  harm  itself  by  exercising 
its  legal  right  to  reduce  rates  to  the  point  where  they 
are  barely  not  confiscatory.  Railroads  compete  in  the 
money  market  with  manufacturing,  mercantile,  and 
other  concerns  for  capital.  Capital  is  invested  where, 
allowance  being  made  for  difference  of  risk,  it  can  get 
the  largest  return.  If  railroads  are  restricted  by  re- 
duction in  rates,  as  some  propose,  to  the  current  rate 
of  interest  on  the  bare  value  of  their  physical  proper- 
ties, while  investors  can  get  an  average  of  from  fifteen 
to  twenty  per  cent  from  investment  in  manufactures, 
is  it  probable  that  capital  will  be  permanently  forth- 
coming for  the  adequate  maintenance  and  develop- 
ment of  the  country's  rail  transportation  system? — 
Samuel  O.  Dunn:  Fair  Regulation  of  Railroads.  North 
American  Review,  February,  1910. 

An  Appeal  to  Reason. 

I  do  not  wish  to  speak  in  a  spirit  of  complaint  or 
criticism;  but  I  want  to  ask  you  to  carefully  study 
the  legislation,  National  and  State,  that  has  been 
passed  during  the  last  five  years  in  the  so-called  regula- 
tion of  railroads — regulation  that  has  resulted  in  al- 
most every  instance  in  either  seriously  reducing 
revenue  or  largely  increasing  the  cost  of  operation. 

Recall  the  campaign  of  violent  agitation  and  ex- 
travagant unmeasured  condemnation  of  the  past  four 


166 


years.  Bear  in  mind  that  the  average  return  on  capital 
invested  in  our  railroads  is  about  4.4  per  cent,  whereas 
the  return  on  money  invested  in  agriculture  (using 
statistics  of  1905  as  a  basis)  averages  about  ten  per 
cent,  in  manufacturing  over  fifteen  per  cent,  and  in 
merchandising  and  banking  above  twenty  per  cent. 
Remember  that  everything  in  the  way  of  development 
of  railroad  transportation  in  the  past  has  been  the 
result  of  the  investment  of  private  capital,  and  that  if 
these  extensions,  enlargements,  and  improvements, 
absolutely  indispensable  to  national  growth  and  de- 
velopment, are  made,  it  must  be  by  the  further  in- 
vestment of  private  capital  by  private  citizens,  or  that 
dread  alternative  of  Government  ownership. 

Then  ask  yourselves  if  these  conditions  are  of  such 
a  character  as  to  attract  new  investors  or  to  encourage 
those  that  have  already  invested  largely  in  railroads  to 
materially  increase  their  investments. — W.  C.  Brown: 
The  Country  and  the  Railroads.  Address  at  the 
seventh  annual  dinner,  Albany  Chamber  of  Commerce, 
Albany,  January  7,  1909. 

The  Unending  Way  of  Capital. 

Wherever  a  steel  track  can  be  made  to  pay,  that  steel 
track  will  be  built;  for  that  is  the  unending  way  of 
capital.  In  a  world  of  politics,  great  and  small,  of 
laws  wise  and  foolish,  of  lawsuits  sane  and  crazy,  of 
scandal  aimed  at  stock  exchange  and  magnate,  it  is 
well  to  remember  this  one  fact,  that  capital,  and 
capital  alone,  can  open  up  the  million  fields  yet  un- 
broken in  this  country,  and  coax  civilization  into  the 
great  lands  as  yet  untrodden. — C.  M.  Keys:  The  Ad- 
vance Agent  of  Prosperity.  World's  Work,  January, 
1909. 


167 


Interest  of  the  Shipper 

Ignoring  the  right  and  wrong  of  such  a  proceeding- 
its  hopeless  injustice  to  those  who  have  in  good  faith 
put  their  money  into  railway  enterprise — and  passing 
directly  to  the  cold  question  of  expediency,  would  the 
limitation  of  profits  accomplish  the  end  in  view,  the 
lowering  of  the  actual  cost  of  service?  Why,  of  course 
it  would,  we  hear  it  said ;  that's  the  point  of  the  whole 
thing — to  limit  profits  by  making  the  railway  charge 
less  for  its  service.  But  just  a  moment.  It  stands  to 
reason,  of  course,  that  if  a  railroad  is  making  what  is 
considered  too  much  money  and  its  rates  are  ordered 
reduced,  its  profits  will  be  cut  down.  But  suppose  now 
that  as  a  result  of  its  profits  having  been  cut  down 
the  railroad  can't  spend  as  much  for  improvements  as 
it  used  to  and  there  is  deterioration  in  the  service 
offered.  Then  how  about  the  lower  rates?  Apparently 
they  are  lower,  but  are  they  really  so?  Well,  the  ship- 
per pays  less  money.  Yes,  but  not  for  the  same  thing. 
The  railroad,  perhaps,  was  contemplating  buying  a 
number  of  bigger  engines  or  putting  in  double  track  or 
doing  other  things  calculated  to  make  it  possible  to 
move  freight  faster  and  better.  Very  possibly  now, 
with  its  margin  of  earnings  so  reduced,  it  will  not  feel 
like  spending  the  money  and  the  improvement  in 
service  will  not  be  made.  The  shipper  may  be  paying 
less,  but  he  is  getting  correspondingly  less  for  his 
money. — Franklin  Escher:  The  Delicate  Question  of 
Railway  Oreditt  Worth  American  Review,  February, 
1913. 


168 


A  Surplus  for  Emergencies 

The  railroads  should  be  permitted  to  earn  and  hold 
a  surplus  equal  to  fifty  per  cent  of  the  amount  they 
pay  out  in  dividends,  to  be  held  for  emergencies  and 
applied  to  improved  facilities.  There  are  many  ex- 
penses, and  new  ones  constantly  arising,  that  must  not 
be  added  to  capital  charge  unless  rates  are  to  be  made 
that  the  public  cannot  and  ought  not  to  be  asked  to 
bear.  In  addition  to  the  heavy  demands  of  the  ordi- 
nary growth  of  traffic,  there  are  many  extraordinary 
expenses. — James  J.  Hill:  The  Country's  Need  of 
Greater  Railway  Facilities  and  Terminals.  Address 
at  annual  dinner  of  Railway  Business  Association, 
New  York,  December  19,  1912. 

The  Railroad's  Surplus 

An  extraordinary  doctrine  is  now  being  propounded 
in  many  quarters.  It  is  held  that  the  accumulation  of 
a  surplus  is  evidence  that  rates  are  too  high  and  ought 
to  be  lowered;  just  as  if  the  man  who  earns,  saves 
and  puts  a  dollar  in  bank  to  meet  future  contingencies 
thereby  admitted  himself  guilty  of  either  dishonesty 
or  extortion.  It  is  held  that  a  railroad  has  no  right  to 
receive  or  enjoy  income  derived  from  any  other  source 
than  the  operation  of  its  plant.  It  is  asserted  that  a 
railroad  has  no  right  to  the  natural  increment  in  the 
value  of  its  property,  though  this  is  not  denied  to  any 
other  corporation  or  to  any  individual  under  like  cir- 
cumstances. It  has  been  attempted  to  apply  these 
principles  to  the  regulation  of  railway  property,  strip- 
ping it  of  privileges  enjoyed  by  citizens  and  other 
corporate  entities  under  the  Constitution.  But  how 
about  the  other  side  of  the  shield?  Does  the  State 


recognize  and  abide  by  this  same  doctrine  when  its 
own  revenue  is  at  stake? — James  J.  Hill:  The  Country's 
Need-  of  Greater  Railway  Facilities  ana  Terminals. 
Address  at  annual  dinner  of  Railway  Business  Asso- 
ciation, New  York,  December  19,  1912. 

Theory  of  Railroad  Stock  Issues 

Every  one  knows  that  railroad  securities  are  divided 
into  two  classes,  stocks  and  bonds ;  very  few  people 
apprehend  as  plainly  as  they  should  the  distinction 
between  the  two,  or  understand  the  real  nature  of  a 

share  of  railroad  stock.    As  to  the  real  nature  of  a 

• 

railroad  bond,  there  is  no  doubt  at  all.  It  is  essen- 
tially a  note  made  by  the  company — a  promise  to  pay 
a  certain  amount  of  money,  say  one  thousand  dollars, 
at  a  specific  date  of  maturity,  and  to  pay  interest  at 
specified  rates  in  the  meantime.  The  obligation  is 
definite.  The  value  is  limited  by  the  terms  of  the  in- 
strument. 

But  a  share  of  railroad  stock  is  of  a  different  and 
more  complex  character.  It  represents  two  things 
instead  of  one:  That  a  certain  sum  has  been  paid  in, 
and  that  the  holder  of  the  stock  has  a  certain  share  in 
the  ownership  of  the  property,  of  whatever  value  that 
may  prove  to  be.  The  second  of  these  things  is  what 
ultimately  gives  the  stock  certificate  its  value.  In 
the  case  of  a  railroad  bond  the  fact  that  if  calls  for 
one  hundred  or  one  thousand  dollars  is  a  determining 
factor  in  what  it  is  worth.  But  in  the  case  of  stock, 
the  fact  that  the  certificate  represents  one  hundred 
or  one  thousand  dollars  is  far  from  being  the  deter- 
mining factor.  It  is  but  one  incident  among  many. 
Even  in  theory  it  purports  merely  to  show  that  this 
was  the  amount  originally  paid  by  the  subscriber 
when  the  road  was  built.  It  does  not  create  an  obli- 


170 


gation  to  pay  its  face  value,  nor  does  that  face  repre- 
sent its  money  value  as  a  share.  The  value  varies 
with  the  development  of  the  property  as  a  whole.  If 
it  has  been  wisely  located  and  well  managed  it  will 
be  worth  more  than  the  amount  it  represents.  If  it 
has  been  unwisely  located  or  badly  managed  it  will 
be  worth  less  than  the  amount  it  represents.  The 
shareholder  chose  his  investment,  elected  his  manage- 
ment, and  took  his  risks.  If  he  acted  unwisely  and 
fares  badly,  he  has  no  claim  that  the  public  should 
indemnify  him.  If  he  did  well,  the  public  cannot 
either  rightly  or  wisely  fail  to  recognize  and  reward 
his  foresight,  so  long  as  his  road  is  managed  with 
proper  regard  to  the  interest  of  the  community  and  for 
the  development  of  the  traffic  which  it  carries. 

The  principal  of  a  bond  is  a  fixed  sum,  its  interest 
a  fixed  charge.  The  value  of  a  share  of  stock  is  essen- 
tially variable,  its  profit  essentially  indeterminate. — 
Report  of  Railroad  Securities  Commission,  1911, 
Arthur  T.  Hadley,  Chairman. 

New  Issues  of  Bonds 

It  seems  to  be  generally  agreed  that  no  limitation 
should  be  placed  on  the  price  at  which  bonds  can  be 
sold;  but  any  discount  should  be  canceled  or  amor- 
tized during  the  life  of  the  bonds  by  the  appropriation 
each  year,  out  of  annual  income  or  surplus  accumu- 
lated after  the  issue  of  the  bonds,  of  not  less  than  the 
proportionate  amount  of  the  discount  In  the  case  of 
convertible  bonds,  the  same  provision  should  hold 
good,  with  the  additional  restriction  that  after  con- 
version the  laws  governing  the  amortization  of  dis- 
count on  stock  sold  below  par  should  apply  also  to  the 
unamortized  discount  on  convertible  bonds.  While 
the  convertible  bonds  themselves  may  be  sold  below 


171 


par,  the  conversion  price  of  the  stock  should  equal  its 
face  value,  except,  of  course,  in  case  of  shares  with- 
out par  value,  where  no  limit  as  to  conversion  price  is 
necessary  nor  any  amortization  after  conversion.  The 
premium  on  bonds  redeemed  before  maturity  or  the 
unamortized  discount  on  bonds  thus  redeemed  should 
be  charged  to  profit  and  los^s,  and  provision  made  for 
the  gradual  cancellation  of  this  charge  out  of  income. 
Issues  of  convertible  bonds  should  be  offered  to 
stockholders  pro  rata,  in  the  same  manner  as  stock 
itself,  to  the  extent  to  which  they  may  choose  to  avail 
themselves  of  the  privilege  of  subscription.-pReporf 
of  Railroad  Securities  Commission,  1911. 

What  Constitutes  a  Reasonable  Return 

We  hear  much  about  a  reasonable  return  on  capital. 
A  reasonable  return  is  one  which  under  honest  ac- 
counting and  responsible  management  will  attract  the 
amount  of  investors'  money  needed  for  the  develop- 
ment of  our  railroad  facilities.  More  than  this  is  an 
unnecessary  public  burden.  Less  than  this  means  a 
check  to  railroad  construction  and  to  the  development 
of  traffic.  Where  the  investment  is  secure,  a  reason- 
able return  is  a  rate  which  approximates  the  rate  of 
interest  which  prevails  in  other  lines  of  industry. 
Where  the  future  is  uncertain  the  investor  demands, 
and  is  justified  in  demanding,  a  chance  of  added  profit 
to  compensate  for  his  risk.  We  cannot  secure  the 
immense  amount  of  capital  needed  unless  we  make 
profits  and  risks  commensurate.  If  rates  are  gt>ing 
to  be  reduced  whenever  dividends  exceed  current  rates 
of  interest,  investors  will  seek  other  fields  where  the 
hazard  is  less  or  the  opportunity  greater.  In  no  event 
can  we  expect  railroads  to  be  developed  merely  to  pay 
their  owners  such  a  return  as  they  could  have  oh- 


172 


tained  by  the  purchase  of  investment  securities  which 
do  not  involve  the  hazards  of  construction  or  the  risks 
of  operation. — Report  of  Railroad  Securities  Commis- 
sion, 1911. 

Amount  of  Additional  Capital  Required 

• 

There  is  a  widespread  belief,  based  on  imperfect 
examination  of  the  evidence,  that  the  amount  of  capi- 
tal needed  for  the  future  development  of  our  railroad 
system  is  small  in  proportion  to  that  which  has  been 
required  in  the  past;  that  the  profits  on  such  added 
investments  of  capital  are  reasonably  well  assured, 
and  that  we  can  therefore  fix  attention  predominantly, 
if  not  exclusively,  on  the  needs  of  the  shipper  without 
interfering  with  the  necessary  supply  of  new  money 
from  the  investors. 

It  is  quite  possible  that  the  building  of  additional 
railroad  mileage  will  be  far  less  rapid  in  the  future 
than  it  has  been  in  the  past,  but  the  capital  needed 
for  the  development  and  the  improvement  of  the  mile- 
age already  existing  is  enormous,  even  if  we  built  no 
new  mileage  at  all.  The  outstanding  stock  and  debt 
of  the  railways  in  the  United  States  averages  less 
than  $60,000  a  mile  of  line.  This  figure  is  bound  to 
be  greatly  increased  in  the  immediate  future.  As  our 
population  grows  denser,  we  shall  need  more  and 
more  to  approximate  European  standards  of  construc- 
tion by  the  increased  amount  of  double  track,  the 
abolition  of  grade  crossings,  the  development  of  sta- 
tion* facilities,  both  for  passengers  and  for  freight, 
and  many  other  improvements  scarcely  less  funda- 
mental. While  our  railroads  are  perhaps  even  better 
equipped  than  those  of  Europe  for  the  economical 
handling  of  large  masses  of  long-distance  freight,  they 
are  far  from  being  adequately  provided  with  appli- 


173 


ances  to  secure  the  convenience  of  the  public  or  the 
safety  of  passengers  and  employees.  The  cost  of  all 
these  things  is  very  great.  The  average  capitaliza- 
tion per  mile  of  railroads  in  Germany  is  $109,000;  in 
France,  $137,000;  in  Belgium,  $177,000;  in  Great  Brit- 
ain, $265,000 ;  and,  contrary  to  the  commonly  received 
opinion,  much  of  this  excess  of  cost  as  compared  with 
American  roads,  is  due  to  other  causes  than  the  price 
of  real  estate — an  item  in  which  our  companies  have 
had  a  great  advantage.  The  cost  of  European  roads 
has  been  largely  due  to  improvements  which  we  have 
not  yet  made  and  many  of  which  we  must  make  in  the 
future  as  population  grows  denser.  The  thousands  of 
millions  of  dollars  needed  for  these  purposes  must  be 
raised  by  the  sale  of  securities. — Report  on  Railroad 
Securities  Commission,  1911. 


GOVERNMENT  OWNERSHIP  AND 
VALUATION. 


What  State  Ownership  Means 

State  railroad  ownership  too  often  means  not  the 
ownership  of  the  State  as  a  whole,  but  of  a  small  body 
of  men  who  happen  to  hold  political  power  at  the 
time ;  it  is  neither  more  nor  less  than  the  substitution 
of  a  ring  of  political  managers  for  a  ring  of  railroad 
managers.  Its  practical  success  varies  according  to 
the  condition  of  the  civil  service.  But  the  Govern- 
ment is,  as  a  rule,  less  responsible  than  a  private  cor- 
poration, instead  of  more  so.  If  there  is  any  lesson 
which  is  clearly  taught  by  the  history  of  railroad  man- 
agement from  the  beginning  until  now,  it  is  that  pub- 
licity and  responsibility  are  more  important  than  any 
set  of  laws  or  regulations. — Arthur  T.  Hadley:  Ameri- 
can Railroad  Legislation.  Harper's  Magazine,  June, 
1887. 

President  Wilson's  Position 

Society  can  by  no  means  afford  to  allow  the  use  for 
private  gain  and  without  regulation  of  undertakings 
necessary  to  its  own  healthful  and  efficient  operation, 
and  yet  of  a  sort  to  exclude  equality  in  competition. 
Experience  has  proved  that  the  self-interest  of  those 
who  have  controlled  such  undertakings  for  private 
gain  is  not  coincident  with  the* public  interest;  even 
enlightened  self-interest  may  often  discover  means  of 
illicit  pecuniary  advantage  in  unjust  discriminations 

174 


175 


between  individuals  in  the  use  of  such  instrumentali- 
ties. But  the  proposition  that  the  Government  should 
control  such  dominating  organizations  of  capital  may 
by  no  means  be  wrested  to  mean  by  any  necessary  im- 
plication that  the  Government  should  itself  admin- 
ister those  instrumentalities  of  economic  action  which 
cannot  be  used  as  monopolies.  In  such  cases,  as  Sir 
T.  H.  Farrar  says,  "there  are  two  great  alternatives : 
(1)  ownership  and  management  by  private  enterprise 
and  capital  under  regulation  by  the  State ;  (2)  owner- 
ship and  management  by  Government,  central  or 
local."  Government  regulation  may  in  most  cases  suf- 
fice. Indeed,  such  are  the  difficulties  in  the  way  of 
establishing  and  maintaining  careful  business  man- 
agement on  the  part  of  the  Government  that  control 
ought  to  be  preferred  to  direct  administration  in  as 
many  cases  as  possible — in  every  case  in  which  control 
without  administration  can  be  made  effectual. — Wood- 
row  Wilson:  The  State. 

President  Taft's  Views 

v' 

This  presents  the  question  of  Government  ownership 
of  public  utilities  which  are  now  being  conducted  by 
private  enterprise  under  franchises  from  the  Govern- 
ment. I  believe  that  the  true  principle  is  that  private 
enterprises  should  be  permitted  to  carry  on  such  pub- 
lic utilities  under  due  regulation  as  to  rates  by  proper 
authority,  rather  than  that  the  Government  should 
itself  conduct  them.  This  principle  I  favor,  because 
I  do  not  think  it  in  accordance  with  the  best  public 
policy  thus  greatly  to  increase  the  body  of  public 
servants. — Extract  from  President  Taft's  special  mes- 
sage to  Congress,  February  22,  1912. 


178 


Justice  Hughes  Opposed 

I  do  not  believe  in  governmental  ownership  of  rail- 
roads. But  regulation  of  interstate  transportation  is 
essential  to  protect  the  people  from  unjust  discrim- 
inations and  to  secure  safe,  advantageous,  and  impar- 
tial service,  upon  reasonable  terms,  in  accordance  with 
the  obligations  of  common  carriers. — Statement  made 
by  Hon.  Charles  E.  Hughes,  Justice  of  United  States 
Supreme  Court  and  ex-Governor  of  New  York,  in  an 
address  on  January  31,  1908,  in  New  York  City. 
JJ\T*  ty*~t :  o  AjU6^  '^**~<fA*vA^ 

Government  a  Bad  Business  Agent. 

In  the  United  States  the  Central  Government  pos- 
sesses under  the  Constitution  a  minimum  of  govern- 
mental functions.  Yet  even  among  us  the  public 
business  is  conducted  with  much  less  energy  and  effi- 
ciency than  private  business.  Although  some  Euro- 
pean States  own  and  manage  the  railways — never, 
however,  with  great  success — we  hesitate  to  invest  our 
Government  with  this  function  because  of  its  incom- 
petency  as  a  business  agent  and  the  inefficiency  to 
which  it  is  doomed  by  partisan  politics. — Dr.  Jacob 
Gould  Schurman,  President  of  Cornell  University,  in 
the  New  York  Tribune,  February  25,  1912. 

A  Hazardous  Test 

It  (i.  e.,  the  railroad)  can  hardly  be  taken  over  and 
worked  by  the  National  Government  as  are  the  rail- 
ways of  Switzerland  and  many  of  those  in  Germany 
and  the  Austro-Hungarian  monarchy.  Only  the  most 
sanguine  State  Socialist  would  propose  to  impose  so 
terrible  a  strain  on  the  virtue  of  American  politicians, 


177 

not  to  speak  of  the  effect  upon  the  constitutional  bal- 
ance between  the  States  and  the  Federal  authority. — 
Extract  from  the  American  Commonwealth  (new  edi- 
tion, 1910,  vol.  //,  part  6,  chapter  106),  by  James 
Bryce,  British  Ambassador  to  the  United  States. 

State  Ownership  in  Europe 

Extract  from  a  letter  by  the  Hon.  Evelyn  Cecil, 
M.  P.,  on  the  railway  nationalization  question  in  Great 
Britain,  published  in  the  London  Times,  JiiTre-8"H#12. 
The  first  portion  of  the  first  paragraph  deals  with  the 
Western  Railway  of  France : 

"Its  enormously  enhanced  deficit,  its  greater  ineffi^ 
ciency  of  operation,  and  the  insubordination  of  its 
staff  since  it  has  been  taken  over  by  the  State  are  now 
notorious,  and  even  affect  English  continental  traffic 
to  Normandy  and  Brittany.  These  disastrous  results 
were  preceded  by  a  large  increase  in  the  number  of 
employees,  on  the  acquisition  of  the  railway  by  the 
government,  which  has  in  no  way  been  justified  by 
increased  efficiency.  Under  state  management  the  dis- 
cipline necessary  to  the  best  administration  is  disre- 
garded by  employees,  who  are  mostly  electors,  while 
the  pressure  brought  upon  a  squeezable  minister  to 
raise  wages  is  highly  detrimental  to  public  interest. 
There  is  a  similarly  large  increase  in  the  number  of 
railway  employees  in  Belgium,  where  the  private  lines 
were  taken  over  by  the  State,  and  Belgian  State  rail- 
ways are  run  at  a  loss.  In  Italy,  when  the  chief  rail- 
ways were  nationalized  in  1905,  the  number  of  em- 
ployees was  increased  within  three  years  from  97,000 
to  137,000,  and  the  systems  do  not  earn  enough  to  pay 
one-quarter  of  the  interest  on  investment  in  them. 
The  whole  process  of  nationalization  in  Italy  was  ac- 
companied by  widespread  strikes,  and  in  one  case  the 


178 


appointment  by  the  government  of  a  most  capable 
officer  was  directly  afterwards  canceled,  apparently 
on  the  ground  that  this  highly  reputed  expert  was  ob- 
jected to  by  the  men  as  too  strict  a  disciplinarian.  It 
has  been  charged  in  the  Canadian  Parliament  that 
during  political  campaigns  the  government  increases 
the  number  of  employees  on  the  Intercolonial  Railway 
(which  is  under  government  management)  to  influ- 
ence election  results." 

Results  of  Government  Ownership 

Generally  speaking,  the  results  have  been  poor.  For 
instance,  in  1907,  quite  a  favorable  year  for  railway 
traffic,  the  state  systems  of  Europe,  exete4uig_Prussia 
and-Saxony,  earned  possibly  3  per  cent  upon  their  re- 
puted capitals!^  Thus  France  (I'ancien  r£seau  de 
Vtitat)  made  1.87  per  cent,  Italy  2.18,  Norway  2.64, 
Sweden  2.75,  Denmark  2.92,  Wiirtemburg  2.47,  Austria 
3.01,  Belgium  3.29,  Bavaria  3.45,  Hungary  3.50,  Impe- 
rial Railways  of  Alsace-Lorraine  3.58,  Switzerland 
3.62,  Baden  3.90  per  cent.  In  1908,  when  the  effects 
of  the  economic  depression  which  commenced  in  the 
United  States  in  the  fall  of  1907  really  began  to  be 
felt,  the  average  return  fell  considerably  below  3  per 
cent  Such  results  indicate  that  most  of  these  rail- 
ways— on  a  proper  representation  of  capital,  probably 
all  of  them — were  actual  burdens  upon  the  finances  of 
their  respective  states,  for  the  latter  have  usually  had 
to  pay  from  3%  to  4  per  cent,  or  even  more,  for  the 
necessary  capital. — Ernest  R.  Dewsnup,  Bulletin  Amer- 
ican Economic  Association,  April,  1911. 


179 


A  Hard  Blow  to  the  Credit  of  France      ^ 

The  results  of  the  State  purchase  of  railroads  may 
be  summed  up  as  follows: 

The  working  of  State  railroads  is  more  costly  for 
France  than  had  even  been  foreseen  by  its  adversaries. 
It  has  proved  the  powerlessness  of  Parliament  to  con- 
trol such  undertakings.  It  has  set  up  a  class  of  work- 
men and  employees  who  consider  that  the  line  is  run 
for  their  benefit  and  not  for  the  convenience  of  ship- 
pers or  travelers.  It  has  dealt  a  hard  blow  to  public 
credit  in  France. — Yves  Ouyot,  former  Minister  of 
Public  Works,  France,  in  New  YorJc  Times,  January  5, 
1913. 

A  Huge  Political  Machine 

The  day  you  decide  upon  Government  ownership, 
you  have  sown  the  wind  from  which  you  shall  reap 
the  whirlwind — you  have  sown  the  seeds  of  destruction 
of  our  republican  form  of  government,  though  the  end 
may  be  one  or  three  centuries  away.  Let  me  paint 
you  a  picture.  Some  future  demagogic  President  of 
the  United  States,  drunk  with  ambition  to  succeed 
himself;  a  political  machine  composed  of  three  to  five 
million  Government-owned  railroad  employees ;  the 
support  of  capitalistic  interest  that  would  come  with 
the  disposition  in  the  hands  of  such  a  President  of 
$5,000,000,000  annual  income  of  these  railroads— with 
these  tools  your  demagogic  President  would  become 
dictator  over  an  empire  vaster  than  Caesar  in  his 
proudest  moment  ever  dreamed  of. — James  C.  Jeffrey, 
at  the  annual  banquet  of  the  Transportation  Club  of 
Detroit,  February  8,  1913t 


180 


France  a  Bad  Railway  Manager 

From  all  paints  of  view  the  experience  of  State 
railways  in  France  is  unfavorable,  as  was  foreseen  by 
all  those  who  had  reflected  upon  the  bad  results  given 
by  the  other  industrial  undertakings  of  the  State, 
such  as  telephones,  matches,  and  many  others.  The 
State,  above  all  an  elective  administration,  cannot  be  a 
good  commercial  manager.  It  works  expensively,  and 
is  powerless  before  its  employees.  The  experience 
which  we  have  recently  gained  has  had  at  least  one 
result.  It  has  provoked  a  very  lively  movement,  not 
only  against  the  repurchase  of  the  railways,  but  against 
all  extensions  of  State  industry.  This  result  seems  to 
me  fortunate.  I  hope  this  opinion  will  be  maintained, 
and  that  not  only  we,  but  our  neighbors,  may  profit  by 
the  lesson  of  these  facts. — Pierre  Leroy-Beaulieu: 
State  Raihvays  in  France.  (Abstract  from  papers 
read  at  the  Congress  of  the  Royal  Economic  Society, 
January  11  1912.) 

Where  Railroads  Are  State-Owned. 

In  Australia,  and  wherever  else  State  ownership 
and  operation  of  railways  has  been  tried,  the  people 
are  taxed  to  make  good  the  railway  deficits.  In  short, 
American  railways  pay  more  than  their  share  of  the 
public  taxes  and  carry  freight  at  about  one-third  the 
rates  charged  in  New  South  Wales,  where  the  people 
are  taxed  to  make  up  the  railway  deficit,  besides  pay- 
ing high  freight  rates.  The  effect  of  State  ownership 
in  railways  and  other  public  utilities  in  Australia  is 
reflected  in  the  per  capita  indebtedness  of  the  colonies 
as  follows: 


181 


Taxation 
per.  capita. 

Queensland $380 

S'outh  Australia 375 

West  Australia 358 

New  Zealand. 336 

Tasmania 261 

New  South  Wales 221 

What  these  figures  mean  may  be  judged  from  the 
fact  that  the  per  capita  public  debt  in  the  United 
States  is  only  $14,  and  that  of  Canada,  even  with  its 
$80,000,000  debt  for  the  Intercolonial  Railway,  Is  only 
$66  per  head. — Slason  Thompson:  Government  vs. 
Private  Control  of  Railways.  Address  before  Railway 
Department  of  the  Y.  M.  C.  A.,  Chicago,  October  24, 
1905. 

Stimulus  of  Private  Ownership 

We  cannot  expect  railroads  that  are  managed  by  the 
Government  to  be  so  progressive  as  those*  that  are 
managed  by  private  companies.  Not  only  the  railroad 
itself,  but  all  the  great  improvements  and  economies 
in  the  handling  of  traffic  have  come  in  countries  where 
the  system  of  private  ownership  prevailed  and  where 
there  was  an  opportunity  for  competition  to  show  what 
method  was  best.  We  must  not  think  that  because  we 
have  lost  one  of  the  benefits  of  free  competition  in 
American  railroads  we  have  lost  them  all.  It  no 
longer  serves  to  regulate  rates,  but  it  still  serves  as  an 
incentive  to  efficiency  and  economy  and  as  a  stimulus 
to  progressive  methods.  We  cannot  afford  to  give  up 
this  stimulus  by  the  adoption  of  a  system  of  govern- 
ment ownership  without  weighing  carefully  the  prob- 
able results  of  the  change — in  other  words,  without 


182 


seeing  how  government  ownership  works  in  practice. — 
Arthur  T.  Hadley,  President  of  Tale  University,  in 
Youth's  Companion,  April  18,  1912. 

Dangers  of  Excessive  Regulation 

I  do  not  believe  that  the  sentiment  of  the  majority 
of  the  people  of  the  United  States  is  favorable  to 
government  ownership,  nor  do  I  believe  that  Congress 
and  our  State  legislatures  are  consciously  moving  in 
that  direction,  but  I  do  believe  that  if  some  of  the 
more  extreme  legislation  already  enacted  is  supple- 
mented along  the  lines  now  proposed,  the  ultimate 
result  must  be  to  break  down  the  system  of  private 
ownership. 

Some  liberty  of  action  is  essential  to  the  life  of  every 
business  enterprise.  The  manager  must  have  the 
power,  in  respect  to  the  necessities  of  his  business,  to 
reasonably  economize  in  the  matter  of  wages  and  other 
expenses,  and  to  reasonably  adjust  his  charges  to 
economic  ^conditions.  In  the  same  way,  there  must  be 
left  to  the  railway  manager  room  for  the  exercise, 
within  reasonable  limits,  of  similar  powers  of  direc- 
tion and  control.  It  is  impossible  for  the  private 
management  of  railways  to  succeed,  if  the  management 
is  confronted,  in  whatever  direction  it  may  turn  in  the 
orderly  exercise  of  business  judgment,  by  the  fixed 
bayonets  of  legislative  penalties.  Government  which 
regulates  must  so  shape  its  regulation  as  to  leave  to 
the  management  the  power  quickly  to  adjust  itself  to 
the  changes  in  economic  conditions ;  otherwise  private 
ownership  and  private  management  cannot  sustain 
themselves.  If  these  are  to  survive,  it  must  be  recog- 
nized by  American  statesmanship  that  the  common 
carriers  of  America  must  not  be  subjected  to  undue 
restriction  through  what  Mr.  Justice  Brewer  recently, 


183 


speaking  generally,  characterized  as  "an  inordinate 
longing  for  legislation." — W.  W.  Finley:  Address  at 
the  annual  dinner  of  the  Traffic  Club  of  New  York, 
March  6,  1908. 

Built  by  Private  Funds 

The  railroads  of  the  United  States,  unlike  some  of 
the  railroads  of  the  older  countries,  were  not  built  by 
the  Government,  but  by  private  funds,  aided,  of  course, 
in  many  ways,  by  bonuses  from  cities,  towns,  villages, 
and  other  municipalities.  In  1859  we  had  28,000  miles 
of  railroad ;  in  1910  we  had  266,000  line  miles  of  rail- 
road, not  including  second,  third,  or  fourth  tracks, 
yards  or  sidings,  which  indicates  that  in  50  years  we 
built  238,000  miles,  or  enough  to  circle  the  earth  ten 
times.  It  would  be  foolish  for  any  one  to  state  that 
these  railroads  were  built  with  private  funds  as  a 
philanthropic  measure,  simply  to  build  up  our  country. 
Every  one  knows  they  were  built  in  the  full  belief  that 
they  would  be  a  good  investment,  which  would  give 
the  owners  handsome  returns — the  very  same  reason 
that  thousands  of  people  went  into  the  West  and  took 
up  cheap  lands — with  the  hope  that  riches  and  its 
incident  prosperity  would  be  the  reward. — Address  of 
J.  F.  Holden,  at  sixth  annual  dinner  of  Milwaukee 
Traffic  Club,  Milwaukee,  Wis.,  January  20,  1913. 

Would  Imperil  Free  Government 

Regulative  authority  there  must  be.  But  it  must  be 
consistent,  comprehensive,  and  uniform.  It  must  be 
governed  by  the  rule  of  fair  play  to  the  shipper,  the 
railroad,  and  the  consumer  alike.  Behind  ruthless 
aggression  by  either  corporation  or  State  stands  the 
menacing  figure  of  public  ownership.  This  has  no 


184 


power  to  affright  the  present  owners  of  railroads,  since 
their  property  could  not  be  taken  without  fair  com- 
pensation. But  for  the  people  it  would  be  the  begin- 
ning of  the  end.  No  sane  man  can  believe  that  our 
institutions  or  free  government  in  this  country  would 
long  survive  the  change/ — James  J.  Hill:  Highways  of 
Progress. 

Ownership  and  Politics 

The  greatest  positive  danger  of  Government  owner- 
ship lies  in  politics.  There  are  upwards  of  1,700,000 
men  now  employed  by  the  railroads  of  the  United 
States,  earning  over  a  billion  dollars  a  year  in  wages, 
and  if  the  Government  owned  and  operated  the  rail- 
ways they  would  all  become  office-holders.  If  we  may 
believe  the  experience  of  Belgium  and  Italy,  their 
numbers  might  be  expected  to  increase  rather  than 
diminish  under  Government  management.  It  is  not 
difficult  to  imagine  what  the  result  would  be  in  prac- 
tical politics,  what  pressure  there  would  be  upon  a 
party  in  power  for  the  existing  jobs,  and  for  the  crea- 
tion of  new  ones — a  pressure  which  no  civil  service 
could  altogether  resist. — Fairfax  Harrison,  before  the 
Conference  on  Southern  Problems,  at  the  University 
of  the  South,  Sewanee,  Tennessee,  August  1,  1911. 

Effect  on  States 

i 

When,  if  ever,  the  Federal  Government  owns  and 
operates  the  railroad  systems  of  the  country,  the  power 
of  Massachusetts  to  control  the  railroad  service  within 
its  borders,  except  through  its  representatives  in  Con- 
gress, will  be  absolutely  gone.  With  mere  Federal 
regulation,  Massachusetts  may  co-operate,  but  in  this 
co-operation  it  must  secure  proper  service  by  its  own 


185 


agencies  and  efforts.  For  the  regulation  which  will 
consider  the  special  needs  of  the  people  of  Massachu- 
setts little  dependence  can  be  placed  upon  the  general 
regulation  by  national  agencies. — Governor  Foss,  of 
Massachusetts,  Inaugural  Message,  January,  1913. 

Elements  of  Value 

I  wish  also  to  refer  to  the  subject  of  so-called  phys- 
ical valuation.  In  the  first  place,  I  think  that  is  an 
unfortunate  designation  of  the  subject,  because  it  im- 
plies that  there  are  no  elements  of  value  in  a  railroad 
property  except  those  of  a  strictly  tangible  sort.  I 
understand  the  argument  that  in  valuing  a  railroad 
for  public  purposes  there  ought  not  to  be  an  additional 
value  on  account  of  the  rates  that  it  earns,  because 
you  then  argue  in  a  circle ;  you  give  it  a  value  on  ac- 
count of  its  rates,  and  then  give  it  high  rates  on  ac- 
count of  its  value.  I  realize  allowance  must  be  made 
for  that.  But,  eliminating  that  element,  there  is  a 
value  to  the  element  of  a  going  concern  which  I  think 
is  entitled  to  consideration.  I  am  not  going  to  under- 
take to  discuss  that  at  length.  I  mention  it  simply  in 
passing. — Walker  D.  Hines:  Statement  before  Rail- 
road Securities  Commission,  December  22,  1910. 

Rates  and  Physical  Valuations 

The  study  of  systematic  rate-making  has  been  con- 
fused «also  by  the  will-o'-the-wisp  of  the  physical  valu- 
ation theory.  At  first  it  was  the  popular  advocate, 
the  shrewd  politician,  who  seized  upon  physical  valua- 
tion as  a  slogan  because  he  had  heard  so  much  of 
watered  securities  that  he  believed  that  a  valuation 
of  railway  property  would  afford  an  automatic  excuse 
for  compelling  a  reduction  of  rates.  But  after  the 


186 


first  few  valuations  had  been  made,  the  shrewd  poli- 
tician dropped  the  theory  like  a  hot  potato.  The  prac- 
tice of  the  railways  in  the  past  of  putting  back  into 
the  property  so  large  a  proportion  of  their  revenues 
through  maintenance  expenses,  and  the  increment  of 
real-estate  values  which  the  railways  claimed  equally 
with  the  owner  of  the  corner  lot,  were  demonstrated 
to  have  run  up  the  physical  value  of  most  of  the  rail- 
ways, when  ascertained  by  any  fair  system  of  ap- 
praisal, to  a  figure  which  was  dangerous  to  the  theory 
that  rates  were  too  high  if  based  solely  on  physical 
value.  So  some  railways  themselves,  who  at  first  had 
opposed  physical  valuation,  seized  upon  the  discord 
of  the  politician  and  promoted  it  into  a  ground  for  an 
injunction.  But  probably  this  plea  must  now  be  aban- 
doned also  by  the  railways.  The  implacable  logic  of 
the  suggestion  that  on  this  theory,  as  values  are  con- 
stantly increasing,  rates  must  also  constantly  increase, 
would  seem  to  put  an  end  to  rate-making  on  the  sim- 
ple arithmetic  of  physical  valuation,  for  every  student 
of  political  economy  knows  that  railway  rates  in  the 
United  States,  taken  by  and  large,  have,  through  the 
operation  of  general  economic  laws,  gradually  and 
steadily  decreased. — Fairfax  Harrison:  Address  before 
Transportation  Club  of  Indianapolis,  March  31,  1911. 


RAILWAYS  AND  WATERWAYS 


Canals  Only  Supplementary 

Canals  can  never  be  a  substitute  for  railways.  For 
passenger  traffic,  or  for  goods  to  which  speed  is  essen- 
tial, they  are  evidently  useless.  Then,  what  with  lack 
of  water  in  summer,  frost  in  winter,  and  the  neces- 
sarily not  infrequent  closing  for  repairs,  there  is  a 
considerable  number  of  days  in  the  year  in  which 
canals  are  not  available  for  any  traffic.  Moreover, 
there  are  only  certain  portions  of  the  country  whose 
physical  features  permit  the  construction  of  canals  at 
all.  At  best,  therefore,  canals  can  only  be  regarded 
as  a  supplement  to  railways.  Contrary  to  the  usual 
belief,  the  supplement  is  certainly  not  less  expensive 
than  the  original.  It  is  true  that  the  average  cost  of 
a  French  canal  per  mile  is  scarcely  half  that  of  a 
French  railway,  but  in  the  cost  of  the  railways  is  in- 
cluded that  of  lines  in  mountainous  districts  where 
canals  are  inconceivable;  is  included,  moreover,  the 
cost  of  rolling  stock,  of  stations  and  offices,  of  vast 
locomotive  and  carriage  shops;  is  included,  too,  the 
money  spent  in  paying  interest  during  construction, 
none  of  which  expenses  are  incurred  by  the  State  in 
the  case  of  canals. — W.  M.  Acworth:  Taxes  on  Trans- 

p'ort  in  Nineteenth  Century.    January,  1892. 

i 

Different  Kinds  of  Waterways 

Deep  seas  came  into  being  and  their  maintenance  as 
highways  is  free  of  cost,  and  for  their  use  no  toil  is 
charged.  Over  great  bays  and  into  estuaries  the 

187 


188 


largest  of  the  present-day  ocean  liners  can  go ;  but 
there  are  few  of  the  boundaries  dividing  estuary  from 
river  which  they  can  pass.  The  facility  with  which 
even  the  greatest  rivers  can  be  navigated  varies 
greatly.  In  the  United  States  but  few  of  the  rivers 
tributary  to  the  Atlantic  are  navigable  for  consider- 
able distances.  On  the  deep  sea  any  number  of  ships 
as  large  as  can  be  navigated  may  pass  with  undim- 
ished  speed.  On  a  river  the  size  of  the  craft,  the 
rapidity  of  movement,  and  feasibility  of  passing,  are 
limited  by  the  width  and  depth  of  the  channel ;  these 
limitations  apply  with  greater  force  on  a  canal ;  and 
where  there  are  locks  the  rate  of  movement  and 
facility  of  passage  are  further  restricted. 

In  .England  the  canals  that  did  not  pass  under  rail- 
way control  have,  with  but  few  exceptions,  fallen 
into  decay  and  most  of  them  have  been  operated  year 
after  year  at  a  loss.  In  the  United  States  during  the 
early  decades  of  the  nineteenth  century  many  canals 
were  built,  at  a  cost  ranging  from  fourteen  to  seven- 
teen thousand  dollars  a  mile  in  the  level  Middle  States 
and  from  thirty  to  sixty  thousand  dollars  a  mile,  and 
even  more,  in  the  mountainous  east.  It  was  at  first 
the  general  belief  that;  while  tlje  railroads  would  be 
more  useful  for  the  conveyance  of  high-class  mer- 
chandise, demanding  quick  service,  they  would  never 
supplant  the  canals  in  the  conveyance  of  low-grade 
heavy  commodities.  Canal  after  canal  was  abandoned, 
until  at  this  time  there  are  very  few  interior  canals 
in  the  whole  country.  In  England  the  railways  not 
only  demonstrated  their  superiority  over  the  canals  for 
the  transportation  of  interior  traffic,  but  in  very  great 
measure  displaced  the  coastwise  vessels  that  had  been 
in  service  between  one  and  another  of  the  ports.  In 
obedience  to  the  primal  law,  in  the  struggle  for  ex- 
istence there  was  survival  of  the  fittest. 


189 


In  Germany  the  rates  of  the  railways  were  made, 
and  are  maintained,  at  a  level  so  high  that  the  water- 
craft,  which  are  allowed  to  charge  whatever  they 
please  and  to  whomsoever  they  please,  have  in  this 
respect  a  tremendous  advantage.  In  France  the  rates 
of  the  railways  were  arbitrarily  made  and  are  arbi- 
trarily maintained,  at  a  level  which  averages  twenty 
per  cent  higher  than  the  rates  of  the  water-craft, 
which  in  that  country,  as  in  Germany,  Holland,  Bel- 
gium, Austria-Hungary,  Russia,  and  Italy,  are  allowed 
to  charge  whatever  they  please.  The  cost  of  this  is 
enormous.  The  total  capital  expenditure  of  Prussia 
on  its  rivers,  canalized  rivers,  and  canals,  to  1906, 
amounts  to  $132,000,000.  The  revenue  from  the  in- 
terior waterways  in  1905  was  over  $2,300,000  less  than 
the  expenditures  for  maintenance.  If  there  be  added 
thereto  interest  on  the  capital  at  three  and  one-half 
per  cent,  amounting  to  $4,637,750,  it  is  found  that  the 
charge  borne,  without  offset,  by  the  State  of  Prussia 
during  1905  for  its  interior  waterways  amounted  to 
nearly  $6,500,000.  The  interior  waterway  traffic  of 
France  bears  a  charge  of  nearly  nine-tenths  of  a  cent 
per  net  ton  per  English  mile,  which  considerably  ex- 
ceeds the  average  received  by  the  railways  of  the 
United  States  on  all  their  traffic.  In  every  one  of  the 
European  countries  the  Government  practically  makes 
the  boatmen  a  present  of  the  waterways.  Yet,  in 
every  one  of  these  countries  the  superiority  of  the  rail- 
ways is  manifest.  In  the  United  States,  as  in  every 
country  of  Europe,  the  subject  of  waterways  is  a  mat- 
ter of  politics,  tossed  forward  and  back  as  one  or  an- 
other party  comes  into  power  and  as  popular  en- 
thusiasm waxes  and  wanes. — Condensed  from  article 
by  L.  G.  McPherson,  in  Atlantic  Monthly  for  April, 
1910. 


190 


Cost  by  Canal  Greater 

Unless  saving  in  hauling  by  water  can  be  extended 
over  a  considerable  distance — and  a  considerable  part 
of  this  distance  must  be  on  a  natural  waterway,  rather 
than  a  canal — the  total  cost  of  transportation,  includ- 
ing charges  on  the  investment  in  the  waterway  itself, 
will  be  greater  than  that  by  rail.  This  is  a  cardinal 
principle  in  transportation  in  Germany  and  France. 
At  precisely  that  place,  therefore,  where  railway  rate 
regulation  is  most  necessary — namely,  on  local  traffic — 
the  waterways  are  wholly  unable  to  perform  the  serv- 
ice.— H.  G.  Moulton:  Waterways  vs.  Railways. 

Senator  Burton's  Statement 

It  is  said  that  the  reason  for  improving  these 
streams  is  very  largely  the  regulation  of  freight  rates. 
I  maintain  that  that  is  an  erroneous  policy.  Water- 
ways and  railways  alike  are  agencies  for  transporta- 
tion. The  question  is  which  is  the  better  way.  The 
railways,  built  by  private  capital,  cost  money;  the 
improvement  of  rivers  and  harbors  costs  money.  In 
either  case  the  amount  expended  is  a  charge  upon  the 
resources  of  the  country. 

The  better  way  to  regulate  freight  rates  is  by  legis- 
lation, by  the  appointment  of  commissions,  by  the  ex- 
.ercise  of  those  functions  which  the  different  depart- 
ments of  the  Government  possess.  Also,  if  the  im- 
provement of  a  waterway  lowers  freight  rates  in  that 
locality,  is  it  quite  just  to  that  greater  area  which  is 
removed  from  that  waterway?  Whatever  decrease 
must  be  made  in  charges  on  the  railways  paralleling 
the  river  or  waterway  must  practically  be  made  up  by 
increased  charges  where  waterway  competition  doea 


191 


not  exist. — T.  E.  Burton:  Extract  from  speech  in 
United  States  Senate,  February  20,  1913.  Congres- 
sional Record,  p.  3580. 

Rates  of  Railways  and  Erie  Canal  Compared 

A  comparison  of  the  cost  of  transportation  by  canal 
and  by  rail  should  include  not  only  the  immediate  cost 
of  conveyance,  but  also  the  cost  of  capital,  of  operation, 
and  of  maintenance. 

Since  1882  the  canals  of  the  State  of  New  York  have 
been  maintained  and  operated  at  the  expense  of  the 
State  for  the  free  passage  of  boats,  the  only  charges 
paid  by  the  shipper  by  canal  being  those  of  the  boat- 
men for  conveyance.  This  does  not  mean  that  the  fixed 
charges  and  cost  of  maintenance  are  obliterated,  but 
that  they  are  borne  by  the  community  as  a  whole  in- 
stead of  by  the  shipper. 

Official  data  indicates  that  up  to  1905  the  cost  of  the 
Erie  Canal  was  about  $57,600,000,  or  $163,600  per  mile. 
If  only  4  per  cent  be  allowed  for  interest  charges  and 
extraordinary  repairs  and  depreciation  on  the  Erie 
Canal,  and  its  total  cost  be  taken  at  only  $55,000,000, 
the  annual  fixed  charge  for  these  purposes  is  $2,200,- 
000.  This  may  be  termed  the  aggregate  cost  of  capital 
reduced  to  an  annual  basis. 

As  nearly  as  can  be  computed  from  ascertainable 
data  the  expense  of  maintaining  the  Erie  Canal  borne 
by  the  State  of  New  York  for  the  year  1909  was 
$672,105. 

As  nearly  as  can  be  computed  from  ascertainable 
data  the  average  ton-mile  charge  made  by  the  boatmen 
for  conveyance  of  traffic  over  the  Erie  Canal  is  2 
mills. 

A  liberal  estimate  of  the  traffic  on  the  Erie  Canal 
for  the  year  1909  is  435,000,000  ton  miles. 


192 

Apportionment  of  the  aggregate*  annual  cost  of  capi- 
tal to  this  ton  mileage  gives  5.06  mills  per  ton  mile. 
The  cost  of  maintenance  likewise  apportioned  gives 
1.55  mills  per  ton  mile.  These  items  added  to  the 
immediate  charge  for  conveyance  of  2  mills  make  the 
total  cost  of  transportation  of  freight  on  the  Erie 
Canal  8.61  mills  per  ton  mile. 

For  the  same  year  of  1909  the  average  freight  re- 
ceipts were  6.2  mills  per  ton  mile  by  the  New  York 
Central,  6.1  mills  by  the  Erie,  7.4  mills  by  the  Lacka- 
wanna,  and  6.4  mills  by  the  Lehigh  Valley. 

Whichever  one  of  these  various  railway  average  re- 
ceipts per  ton  mile  be  taken,  the  cost  of  transportation 
on  the  Erie  Canal  exceeds  it  by  from  16  to  more  than 
40  per  cent. 

These  average  rail  receipts  moreover  include  returns 
from  high-grade  merchandise  such  as  is  not  carried 
in  any  quantity  on  the  Erie  Canal.  The  traffic  of  the 
Erie  Canal  is  composed  principally  of  grain,  lumber, 
iron,  and  iron  ore  and  coal.  The  receipts  of  the  rail- 
ways from  such  traffic  are  lower  than  their  average 
receipts,  and  therefore  the  ratio  of  rail  receipts  to 
canal  receipts  on  the  kind  of  traffic  that  is  carried  by 
canal  is  lower  than  the  above  percentages  indicate. — 
Bulletin  No.  21  of  the  Bureau  of  Railway  Economics. 


FIVE  POINTS  IN  THE  SITUATION. 


First  of  all,  it  is  very  clear  that  the  period  of  rail- 
road building  and  extensions  is  over.  A  great  deal  of 
capital  is  needed,  and  will  be  used  in  completing  and 
improving  existing  railroads  and  in  adding  to  their 
equipment  and  facilities;  but  the  period  of  building 
extensions  into  new  territory  is  over,  because  there  is 
no  encouragement  to  the  investor.  There  is  a  vast 
territory  west  of  the  Mississippi  and  Missouri  rivers 
which  needs  development ;  but  however  this  may  be,  it 
can  be  put  down  as  a  safe  prognostication  that  if  the 
present  policy  of  regulation  continues,  this  territory 
must  rely  for  development  solely  on  the  extension  of 
branches  and  feeders  from  existing  railways,  and  they 
will  make  additions  to  their  mileage  only  in  proportion 
to  the  encouragement  afforded  by  the  earnings  of  ex- 
isting lines. 

Second.  The  railroads'  cost  of  living  has  gone  up 
enormously  in  the  last  twenty  years.  Staple  necessi- 
ties, such  as  fuel  and  ties,  have  increased  very  largely 
in  cost,  and  at  the  same  time  the  standards  of  service 
which  the  public  lemands  have  greatly  risen.  In 
order  to  increase  their  efficiency,  railroads  have  been 
compelled  to  use  larger  locomotives,  increase  their 
tons  per  train;  this,  in  turn,  has  created  a  demand 
for  larger  and  stronger  cars,  heavier  rail,  better  road- 
bed, and  so  on. 

Another  important  point  is  that  in  recent  years  the 
general  rate  of  interest  has  risen.  It  has  risen  against 

193 


194 


the  railways  as  well  as  against  other  borrowers,  and, 
therefore,  to  raise  adequate  capital  the  railways  must 
pay,  and  must,  therefore,  earn,  a  larger  return  on 
capital  than  formerly  was  necessary.  Railways  which 
a  few  years  ago  could  sell  3%  per  cent  bonds  at  par 
cannot  now  sell  4%  per  cent  bonds  at  par.  The  net 
earnings  of  the  railways  have  not  increased  in  propor- 
tion to  the  increase  in  the  amount  that  they  must  pay 
to  get  new  capital  or  to  refund  old  securities. 

Third.  Every  new  public  demand  of  the  Federal  or 
State  government  or  the  municipality  puts  a  burden 
which  is  especially  heavy  to  bear  by  the  railway  com- 
pany with  small  resources.  It  is  perfectly  clear  to 
railroad  men  that  the  day  of  the  small  railroad  has 
absolutely  gone.  A  railroad  of  less  than  500  miles 
which  is  not  an  adjunct  to  an  important  mining  or 
manufacturing  concern  has  little  show  for  existence. 
Although  public  opinion  more  or  less  resents  the  great 
railroad  corporation  and  the  excessive  centralization 
of  authority  incident  to  these  Inrge  corporations,  yet 
it  is  perfectly  clear  that  the  many  exactions  of  law  to 
which  I  have  briefly  referred  have  had  much  to  do 
with  bringing  them  into  being.  In  the  battle  for  ex- 
istence only  the  strongest  have  been  able  to  survive. 

Fourth.  It  has  been  sometimes  pointed  out  that 
poverty  and  wealth  are  largely  comparative  terms; 
and  certainly  this  applies  to  railway  corporations  just 
as  much  as  to  individuals.  The  plea  of  the  relatively 
poor  corporation  for  an  advance  in  rates  is  unheeded. 
Our  commissions  think  only  of  the  profits  which  our 
richest  corporations  will  make  by  reason  of  a  possible 
advance.  The  fact  that  the  richest  corporations  rep- 
resent relatively  small  proportion  of  the  total  mile- 
age; that  they  are  rich  by  reason  of  fortunate  chance 
or  extraordinary  foresight;  that  many  of  them  are 
corporations  which  went  through  a  long  struggle  in 


195 


their  early  history  and  only  after  bankruptcy  were 
put  upon  a  paying  basis,  is  forgotten.  The  very  com- 
plexity of  all  these  questions  points  clearly  to  the 
principle  that  the  public  should  more  and  more  de- 
pend on  expert  knowledge  in  the  regulation  of  the  rail- 
ways, and  not  attempt  this  regulation  by  annual  legis- 
lative enactments. 

Fifth.  The  greatest  hope  of  the  railways  and  the  public 
in  the  future  lies  in  intelligent  regulation.  Railway  offi- 
cers whom  I  meet  and  talk  with  do  not  in  the  least  fear 
the  results  of  regulation  by  commissions  free  from  poli- 
tical pressure,  with  a  fair  knowledge  of  the  facts.  Our 
experience  is  that  these  commissions,  as  they  come  to 
know  the  problem  better,  are  more  and  more  willing 
to  understand  the  railroad  man's  point  of  view,  and, 
as  we  think,  deal  fairly  with  us.  One  of  the  great 
troubles  is  that  while  the  public  and  the  legislatures 
have  created  these  commissions  on  the  theory  that 
they  will  be  most  competent  to  solve  the  problems  of 
public  regulation,  the  public  and  legislatures  will  not 
refrain  from  interfering  with  the  work  of  the  commis- 
sions. In  many  States  the  legislatures  or  the  people 
by  refer endums  have  adopted  laws  to  reduce  rates  or 
impose  unreasonable  restrictions  or  burdens  on  the 
railways  when  the  legislation  was  openly  opposed  as 
unreasonable,  unjust,  and  harmful  by  the  commis- 
sions. The  public  shows  too  much  of  a  disposition  to 
disregard  injunctions  of  experts  to  be  fair  and  moder- 
ate, even  when  they  proceed  from  its  own  experts,  and 
to  trust  and  follow  only  those  public  men  who  advo- 
cate radical  and  even  violent  measures.  We  are  not 
blind  to  the  danger  which  lies  in  the  public  clamor  for 
better  service  and  more  exacting  requirements.  It 
sometimes  seems  as  if  every  man's  hand  were  against 
us,  and  as  if  few  men  in  public  life  could  be  found  to 
possess  the  requisite  courage  to  withstand  the  pres- 


196 


sure ;  but  my  opinion  is  that  while  the  public  is  slow 
in  making  up  its  mind,  it  finally  comes  to  a  right  con- 
clusion, and  the  reaction  is  all  the  more  effective  when 
it  does  come.  The  time  is  sure  to  arrive  when  the 
public  will  see  that  if  there  isn't  a  fair  profit  in  rail- 
way operation  the  development  is  bound  to  cease,  be- 
cause capital  will  seek  other  and  more  gainful  occupa- 
tions.— Frederic  A.  Delano,  before  the  Economic  Club 
of  New  York,  April  29,  1913. 


SEVERE  TESTS  OF  RECENT  YEARS. 


To  understand  just  what  is  the  matter  with  the 
railways  today  it  is  necessary  to  begin  with  the  situa- 
tion that  confronted  them  in  the  panic  of  twenty  years 
ago.  During  the  six  years  that  followed  the  financial 
breakdown  of  1893,  the  traffic  of  the  railways  so  fell 
off  that  over  a  fourth  of  the  railway  mileage  of  the 
country  went  into  bankruptcy,  and  many  of  the  strong- 
est companies  kept  out  of  receivership  only  by  the 
exercise  of  severest  economy.  All  over  the  country 
freight  cars  by  the  thousand  were  standing  empty  on 
side-tracks;  locomotives  by  the  hundred  were  idle  in 
round-houses;  everywhere  there  was  insufficient  ex- 
penditure upon  roadbed  and  track;  the  forces  of  em- 
ployees in  every  department  of  the  service  were  cut  to 
the  lowest  number  that  could  keep  things  going.  Ship- 
pers pressed  the  railways  for  reductions  in  rates. 

During  a  time  of  depression  is  when  the  railways 
ought  to  put  their  equipment  in  the  best  of  repair  and 
build  up  their  track  and  structures.  They  ought  to 
take  advantage  of  the  low  wages  and  low  prices  for 
material  for  making  extensions  and  improvements. 
Though  but  little  understood,  it  is  a  fact,  however, 
that  the  income  and  outgo  of  the  railways  with  but 
few  exceptions  is  at  all  times  so  nearly  balanced  that 
there  is  seldom  a  surplus  available  for  expenditures 
that  do  not  promise  immediate  return.  For  capital 
expenditure  the  railways  are  nearly  always  obliged  to 
seek  new  capital. 


198 


In  the  six  years  that  succeeded  1893,  surpluses  not 
only  were  whittled  down  and  exhausted,  but  new 
capital  was  not  obtainable.  During  those  six  years 
the  country  was  saturated  with  pessimism.  It  was 
the  common  cry  that  the  manufacturing  capacity  ex- 
ceeded any  probable  demand  for  a  generation  to 
come. 

THE  TIME  OF  PESSIMISM 

Right  and  left  it  was  said  that  the  pauper  labor 
of  Europe  made  it  impossible  for  the  United  States 
to  continue  in  the  world's  markets;  politicians  and 
muckraking  writers  uttered  dire  misgivings  as  to  the 
oncoming  competition  of  the  awakening  East,  the 
so-called  yellow  peril  of  the  Orient.  Under  these  con- 
ditions a  railroad  manager  who  would  have  endeavored 
to  obtain  new  capital  for  extending  track  and  extend- 
ing equipment,  for  increasing  the  capacity  of  his  rail- 
road beyond  immediate  needs,  not  only  would  have 
been  unable  to  obtain  the  money,  but  would  have  been 
deemed  a  lunatic.  The  energies  of  the  great  bankers 
were  not  then  devoted  to  raising  new  capital  in  prepa- 
ration for  the  future,  but  to  the  readjustment  of  exist- 
ing capital  issues  that  the  railroads  might  be  kept  run- 
ning at  the  time. 

That  the  pessimism  was  without  foundation  was 
proved  by  the  course  of  events.  Yet  at  the  time  the 
despairing  utterances  were  believed  to  portray  the 
conditions. 

The  resumption  of  business  that  began  in  1898  was 
under  terrific  headway  in  1899.  Mills  and  factories 
that  long  had  been  idle  were  working  night  and  day; 
the  farms  burst  forth  in  plenty.  Although  but  a  few 
years  before  in  the  great  cities  public  and  private 
charity  was  feeding  thousands  of  workingmen  who 
could  not  secure  employment,  there  was  now  work  for 
multiple  the  number  of  men  that  were  available. 


199 


Capital  flowed  into  new  investment  like  the  rush  of  a 
vernal  torrent.  Millions  and  millions  of  dollars  were 
ready  to  open  new  mines,  to  build  new  mills  and  fac- 
tories and  to  provide  new  machinery,  and  to  erect  new 
skyscrapers,  new  hotels,  and  theaters. 

CAME   ON    THEM    UNAWABE 

This  burst  of  business  came  upon  the  railroads 
pretty  much  as  the  Spanish  war  came  upon  the  War 
Department.  President  McKinley  held  up  the  war  to 
give  the  Department  a  chance  to  get  ready,  but  there 
was  nobody  to  hold  up  the  flood  of  traffic  until  the 
railroads  were  ready.  It  hit  them  fore  and  aft  and 
amidships.  What  seemed  like  a  spring  freshet  in  1900 
had  become  a  raging  torrent  in  1901.  There  is  no 
business  in  this  country  that  does  not  have  to  rely  upon 
the  service  of  the  railroads  and  it  is  hardly  an  ex- 
aggeration to  say  that  at  that  time  there  was  not  a 
business  in  the  country  to  which  the  railways  rendered 
service  that  was  satisfactory  to  those  engaged  in  its 
direction.  Raw  material  coming  in  and  finished  pro- 
duct going  out  were  subjected  to  unwonted  delay. 
There  was  not  a  mill,  or  a  mine,  or  a  factory,  or  a 
farm  that  was  not  clamoring  for  more  cars  and 
prompter  service.  Retail  stores  were  complaining  and 
even  the  householder  awaiting  a  shipment  of  furni- 
ture had  his  patience  exhausted. 

At  that  time  the  railways  were  not  even  given  credit 
for  doing  the  best  they  could.  They  were  moving  an 
unprecedented  volume  of  business,  and  the  country  was 
prospering  as  never  before.  Mines  and  mills  had  never 
turned  out  so  much ;  the  stocks  in  wholesale  and  retail 
stores  had  never  been  so  heavy.  Yet  the  railways  did 
not  have  tracks  enough,  cars  enough,  locomotives 
enough,  or  employees  enough,  and  there  were  manu- 


200 

facturing  plants  that  were  stealing  away  their  men  at 
the  same  time  they  were  complaining  of  their  service. 
The  railways  were  so  clogged  that  additional  traffic 
meant  a  loss  instead  of  a  gain. 

LITTLE  MONEY  FOB  RAILWAYS 

The  railway  managers  learned  that  they  needed 
more  capital,  that  there  was  immediate  use  for  every 
dollar  they  could  get ;  but  when  they  asked  for  millions 
instead,  of  the  hundreds  of  millions  which  they  really 
needed,  the  country  was  aghast  Money  had  poured 
into  mines,  mills  and  factories,  and  farms  were  rising 
steadily  in  value,  but  when  the  poor  dog  of  the  rail- 
ways asked  for  a  bone  it  was  kicked  and  cuffed.  Rails, 
cars  and  locomotives  had  been  ordered,  but  the  fac- 
tories also  were  clogged.  This  condition  lasted  the 
greater  part  of  three  years.  The  business  reaction  in 
1903  brought  some  relief. 

In  these  three  years  the  railways  did  a  great  deal 
toward  expanding  their  facilities ;  rails,  cars  and  loco- 
motives at  last  did  come  and  they  came  in  mighty 
volume.  But  there  were  respects  in  which  the  rail- 
ways were  handicapped  by  the  very  advances  which 
they  were  making.  For  example,  it  was  in  about  1895 
or  1896  that  were  built  the  first  steel  freight  cars  with 
capacity  of  forty  and  fifty  tons,  exceeding  by  about 
two-thirds  that  of  the  cars  commonly  in  use. 

About  the  same  time  were  designed  the  new  loco- 
motives with  tractive  power  about  two-thirds  greater 
than  that  of  those  in  use.  As  these  cars  and  locomo- 
tives came  into  service  it  was  found  that  in  many 
cases  roadbed  and  bridges  were  not  strong  enough  for 
the  heavier  weights,  and  that  the  cast-iron  wheels 
which  had  been  adequate  for  the  older  types  of  equip- 
ment were  not  strong  enough  to  support  the  new. 
Thus  was  necessitated  a  general  rebuilding. 


201 


The  heavy  demands  of  the  traffic  compelled  the  use 
of  every  car  that  could  be  placed  in  service,  and  thus 
old  wooden  cars  were  run  in  the  same  trains  with  the 
new  steel  cars ;  the  old  cast-iron  wheels  for  which  no 
satisfactory  substitute  was  immediately  found  were 
the  cause  of  many  a  wreck.  The  necessity  for  the 
rapid  increase  in  their  forces  compelled  the  railways 
to  employ  the  best  recruits  that  could  be  obtained, 
but  who  sometimes  were  without  sufficient  experience. 

ANGRY    AT    THE    RAILROADS 

Most  people  not  only  did  not  appreciate  the  diffi- 
culties of  the  railways  but  were  largely  not  aware  of 
them.  They  were  angry  at  the  railroads.  They  had 
had  a  good  deal  against  the  dog  anyhow,  and  just 
wanted  to  kick  it. 

The  Federal  legislation  shaped  by  the  houses  of 
Congress  has  much  to  commend  it,  and  the  Interstate 
Commerce  Commission  admittedly  is  a  fine  body  of 
men.  There  is  no  criticism  here  of  the  Federal  legis- 
lation or  of  the  Commission  except  to  suggest  that 
neither  would  be  human  if  it  were  perfect.  The  trouble 
was  that  the  attack  upon  the  railroads  was  taken  up 
by  the  State  legislatures,  and  they  have  been  kicking 
the  dog  ever  since.  They  have  not  confined  their 
energies  to  the  regulation  of  the  railways,  but  have 
passed  bill  after  bill  prescribing  detail  of  railway  ad- 
ministration oftentimes  without  giving  the  railway 
officers  a  fair  chance  to  be  heard. 

RUSH   HAS   CONTINUED 

The  railroads  at  the  beginning  of  this  century  were 
quite  unprepared,  and  through  no  fault  of  their  own, 
for  a  rush  of  traffic  such  as  the  country  had  not 
known.  They  have  been  forced  to  renew  their  facili- 


202 


ties  in  the  face  of  this  onrush,  which  has  continued 
except  during  two  brief  periods  of  reaction.  They 
have  been  harassed  in  obtaining  requisite  capital  and 
by  legislation,  much  of  which  has  been  injurious  in  its 
effect.  Under  these  conditions  the  railways  have  ac- 
complished a  great  deal,  but  the  development  has  been 
very  uneven.  They  have  done  the  things  that  they 
were  obliged  to  do  to  meet  the  immediate  demands  of 
traffic  and  the  immediate  behests  of  legislators.  They 
have  not  had  the  capital  or  the  opportunity  to  do  many 
things  that  must  be  done,  which  the  people  must  allow 
them  to  have  the  means  for  doing,  and  which  the 
people  must  not  expect  them  to  do  unless  they  have 
the  means. — L.  G.  McPherson:  a  syndicate  article 
printed  in  various  newspaper,  May  26,  1913. 


203 


M- 

\j 

< 

H 

oa 

Q 


»  • 


^ 


II 

^ 


o 


o    I 


05 


"Su  o 

st 


8 


204 


S 


* 


_« 

s! 


IO      ^      "«tl      00 

of    <xT    ocT    GO" 


<;     I 

s  I 


OQCO£rr-lC50QOO 
CO       ILD       00,      05^      IO       i-^      <N^ 

of    oo"    ^3     cxf    co"    r-T    oo" 


E3     ^ 
HH      e 


W 
S 


s 

o, 

.2* 

3 
O* 


O 

o 


<xf 
» 


205 


:  a 


COCOCO 


H 
H 

CO 

p 


S  I 

• 


a 

cS 
O 


sf 


t^    od 

CO       t- 


OS       l£3       Ci       CO       CO 
to       to       1C       CO       O 

to     to     to    CD     i-     t-     t- 


p 
d 

4^ 

fl 

a 


I    -s 


00 
b- 


iH  CO 
TfH  (M 
t^  00 


H  ^ 
B  ^ 
H  5 

fe  § 
o  I 

CO     * 

5  •§ 

?<^S|G-  OiOTHC^COOOcD'^lO 

»^  co^m-  b-TtHcooot-toco^oo 

l^t^E^-2  t-to^o^?^Oto4iTtH 

•J        °       .g*      o         a  Cf      10       I-       rH       M       «       »       ^      ^f 

M    >t     »    ±  o^ot^coOiot-cs 

^e^g^-Su  toO^cot^coo^t-o^oo 

A/  'r-T-T^M  Q6^r-TccfoO*'crC5Vl>rcO*VQd 

KoWS^  $THB<NCDQt-poo 

^          H  9P"  QI-  9    1   e|   ^,    TH    i3    to 

O  I  .  ^  ;•-;:•,'    ^  'I 

CO     ^ 

o  'S  : 

£  *  ::::::::::: 

a  i          ;;;;;;;;;;; 

B4       H     f 

CO 


206 


'* p     >  t-  o    oo    co    o 

•+»  irj  be  o    on      IA      TH      <fn      t*™      CO      Oi      CO      ^H      t"*      TH 

^^'a>5t-H>eCc$'fl£>a$so^t^eo"oo" 

£        ~ 
CO 

co      2  .£P^j£    ofofofof^TcfofC'fofofcf 

Q    |  |Ss 

H     & 

1-4         ^ 

sz    ^ 

&3      ^       «>       2  *       TH"    QO    TH"    TH"    co"    oT    co"    TH*    co"    co"    t-^ 

u^         btfl         ^^         O5l-(NO5l>-OOCOTHCOCOO 

W       o       cd        Sr«       *    '^    ^    ^t  •'*!>  •**•   *4    *1'  'S*'9    ^> 

H4>       vr  2      o^    cT    cT    T-T    r-T    of    of    01    rH    co    10" 
5s        HH          S  COCOCOCOCOCOCOCOCOCOCO 

h  1  § 
0  I  fl 

M  2 

^        i^         pH 

^  I  COTHCOCO^tSDtoCOTHOOT"! 

^W         *j          os.        oirHb-CO^OC^C^toOOO 

^      o-     "&    •  3 1     if  §  3   cl   ^   TH"   S"   5   w    ^  o 

^1  ©3  -"  •'••    rj  •,»,•>  V  »^  •»  .?>  *«        -•>        ^»-        .  _T 

fa  ^ 

o    I  ::••::::::: 

co    S                   ::::::::::: 
o    3  

g  I        \\l\\l\\l\l 

V       MMMiHM 


207 


C   fl  0) 

•g8J; 

•£  os"o    c^THT-l<NlOC}OOCOCOb-f-1 
bfi  r;  O     00       00       CO       C^l        TH        IO       TH        !>•       CO        Oi       r-^ 

IS-I  8"  £  8   3   8"  8"  8"  8"  8   £  5 
II& 

«j  ^SM 

W      . 

PH       °°  .2  * 

?£  W3  OJS    Oi       O5     *O       O       T-!       i— t       TH      (N^      C^      r-^      00^ 

v^          ^  ^" 

'^     S 

« I  i  i  in  1 1  Hi  in 

P      °      &  05    cf    ci  .  rf    ^T    fc^  t- •   rf  : .»    H    « 

H          S         »3         —         COt-TH^OC^COCI^jHrH 
§         S         g         ^S       T-^      O       iH       r^      00^      O^      CO       05.      O       O^ 

CO  f  . 

i^.   ^   »r^       •••••••••   •• 

^4^«  I!II 

>    ^    w)          •     :     :     :     :     :     : 

>H  W  ^  •  • 

^•J^2co  

<d  !.••••••••• 

o    -J  ::::::     1     i     i     5     •" 

u    ^  :::::::     :     :     :     : 

co    §  •     I     I     •     •     •     •     :     •     :     : 

co  ::::::     :     '.     '     *     " 


208 


IJ  s 

Ss   t^ 


<M       rH       »O       t-       »O 

kO       CO       GO       CO       CO 


CO 


CO 


(M 

oo 
" 


C^ 
00 


H 

ffi 


OV. 
^ 

CO 


,?    - 


- 


s 


209 


o       cOlOOQNcq^OOOOt-^J 

«  TH*  TH  TH  oi  <N  o*  co  co  co*  01  co* 


CO 

W 
H 
< 

3 

P 

W 
H 

HH 

fc 


S 
H 

fe 
O 

CO 


CO 

u 

HH 

13 


S 


©3 

o* 


1 


8  8 

I*"   IO 


®  e 


I- 

CO 


CD"  co  co  co  co  i> 


co  co  i- 


| 

a 

1 
1 

1 

-*-• 
W) 


i  o  co  10  10  oo  co  TJH  "#  oo  co  ^ 

i  OTHCOOt-iMH^I^-THC^O 
O,|N.OOO5T~(OCs^'*^l^*)lOCpQO 
03  W  C^  d  ^  CO  CO  CO  CO  CO 


CO 


GO   O   »Q   O 

O   TH   CO   CO 


10   HH   O 

O   O   TH 


;IIS  8 


CO 


52  t-  O 


I  rf '  8  B  ..  g 

g   IO  TH,.  00^   <N 

|   8  o^  ^  w  iq 

r-T  t*-  t—   CO   ^1 


S  g 

TH  ia 


8  g 

TH   00 


®  §  f:  S  5  |  S 

10  "^  oo  co  co  oo  o 

oo"  oo"  10* 

TH  TH  4O 


IO 

55 


(N 


CO 


8 


210 


g  S  i  g  I  S 

fc»      l>      t*-      t-      t~      t> 


888 


211 


CO 


CO 


H      ^ 

s  1 


ffi 


«a 


m 


\£      M'Z* 
cd      ^"^^ 

W<  rti  *£N    ^ 


^H     CO 


O  CO 

06  (•  $t  *-! 

TH  N  (N  IO 

CO  CO  CO  CO 


8  38  S  8  8.8  8  88 


M 


CO 


--1fo'I-i8'fri.-;S-^  8  Sl'i 

S^c|iHl5ltS®®.rHtH|0^fH 

2  II  S  ^  ^  s  2  S  S  8  §  8  S3 

^  S  fc:  S  <N   oo  oo   ^   oo   o  3s   a  ^1  CD 
°  «  c  «T  i^  oT  jf  icT  oo   i-    co   o   X  r* 

o  A      l»    Q    ^1    d  •  *H    CO    O    S    ®    »    fe? 

>•  lOCOCOCOt—     l^L^-OOQOa'-'Ci» 

...     ..... 

:::::: 
::::::----: 
:  iiii;::::: 
!:::::::::: 

;;;•:;;;:;:: 

:::::::::.. 

............ 

..... 

I         I         I         '.         '.         I         I         I         I         "        " 
...... 

..........      . 

I   •  "'I'      •••'••'••'*• 


212 


CD  IQ  oo 

K»  IO  IO 

iH   rH   TH 


CO 

W 

I 

CO 

Q 
W 


fc    s 


H 
O 
> 


^ 

9 

1 1 

3      X 


|8'S  8  S 


8  8 


«»     W<M       CO       COCOCOCOOOCOCOCO 


|s 


Oi 

§ 

" 


*~?        &•**  C"~  COOi       C5       CO'^^'^CO     .O      t*" 

cecc  0000      C5      OOC>THC<|CO(N 

ID-i  r- 1      TH      rH      T—l      T-H      rn      rH 

I 


pr, 

o    -S 

w    g 
o    ^ 

s  «» 

CO       g 

II 

H 


4) 

OJD 

C 

4> 


8' 


8  S"  8f 


213 


§  I 


O  -ft 

v>  ^ 

O  a 

H  ^ 

CO  g 

t—  4  o 

H^ 

g  "" 

CO 


fe   1   I 

o    i    « 


214 


CO 


co 

S 
H 


0 


§!^ 

s£ 


OP  <£  v*  O 


co 

' 


JD      Q 


ooi 


H 
to 


§ 

| 


fe  fe 

o  -5 

CO  g 

o  *3 


CO 


I 


W) 


la 


.2  C3    .   t-    O     O    I-     t- 

'c'S-^CDt^THOiCM 


&. 
g 


Cj    0) 


! 


HifSffti  * 

'  2>  *3  §  *  ®  a  ® 
H  H  45;A  •  &  £  >• ; 


216 


RAILWAY  BUSINESS  IN  1912. 

Statement  of  the  Bureau  of  Railway  Economics. 

During  a  period  of  expanding  business,  profits  at  first 
usually  rise  more  rapidly  than  expenses.  That  this 
has  not  been  the  case  with  the  railways  of  the  United 
States  during  the  recent  high  tide  of  traffic  is  shown  by 
their  returns  for  the  calendar  year  1912.  The  total 
operating  revenues  are  their  total  receipts  from  freight 
and  passenger  traffic,  from  carrying  mail  and  express, 
and  from  miscellaneous  sources.  Operating  income  is 
the  amount  which  after  all  expenses  have  been  paid 
remains  for  rentals,  interest  on  bonds,  appropriations 
for  betterments,  improvements,  new  construction,  and 
for  dividends. 

That  the  funds  available  for  developing  and  extend- 
ing the  railways  have  not  kept  pace  with  the  growth  in 
traffic  or  the  increased  expenses  of  operation  is  shown 
by  the  following  percentages:  For  the  railways  of  the 
East  the  total  operating  revenues  increased  7.2  per 
cent,  operating  expenses  8.3  per  cent,  and  taxes  8  per 
cent,  leaving  an  increase  in  operating  income  of  4.3 
per  cent.  For  the  railways  of  the  South  total  operating 
revenues  increased  4.9  per  cent,  operating  expenses  8.4 
per  cent,  and  taxes  2.8  per  cent,  leaving  a  decrease  in 
operating  income  of  4  per  cent.  The  unusual  traffic  of 
the  West  enabled  the  railways  of  that  section  to  ob- 
tain an  increase  of  8.4  per  cent  in  operating  income, 
which  just  about  balances  ^he  losses  sustained  during 
1911. 


217  ' 


218 


§ 

a\ 


H 

*s 

O 


Itf 
-M 


S 


219 


CO 

W 
H 

£ 

P 
H 


a 

B 
H 

PH 

O 
co 


CO 

M 
0> 


i  e 


•        , 


s 


CO 

O 

H-t 

13 

HH 

S 


^        g 

O       ^g 

i  & 


•M 

r^  O 

I    I 

O 

O      ^ 

£ 

M 
4> 


ss 


CD 
C0 


220 


i 


en 

1  I 


H 


75 


-g     S 


1 

S    'S     's 
5    J     ! 


d 


to 

5 


g    2 

8 

1    1 


.» 

:  "S 


ail  iJIHil  ii!  If 


°       J        S 

S     »      2 

- 


i 


221 

58 


00 


S 

'^ 

§ 

K 

1 

8  £  8  2  N 

. 

^ 

CO 

r. 

C"J 

^N 

t 

CO 

"2 

n 

o> 

1 

.S 

H 

§ 

•3? 

O 

M 

P 

1 

t 

w 

W 

•<-> 

X 

ll 

H 

•u 

o 

y 

O 

d 

^ 

"co 

-4 

»-. 

^ 

E^ 

> 

t-H 

STATISTICS  OF  RAIL 

Causes  of  Principa 
brakeman  : 

TT*nilnra  fn  cof  hrnlrAS 

j 

5  S 

i  t 

J  £ 

II 
II 

t 
D   | 

'! 

J  . 

ii 

;  | 

1 

.  c/ 

11 

i  4 

>  f. 

II 

dispatchers,  operators,  etc.  : 

Wrong  orders  —  
Failure  to  deliver  orders 
Signal  incorrectly  set.  .  . 
Switch  misplaced  
Other  errors  

other  employees.  . 

222 


g  s§ 


ft" 

H 

a 

1 

s 

1 

s 

<u 
•o 

o 

0 

o 

< 

d 

>* 
< 

8 

H 

|  •  •  •  •  a 

,  1 

"2. 

a 
ad 

i  S 
91  ;  i  « 

STATISTICS  OF  RAI] 

Pi 

"S 

•c 

09 
<U 
CO 

Defective  or  weakened  ti 

g  S  Ml  -g 

II  *  2 
1  S  3  « 
*  A  1  §  3 

515.  11 

Ttain  or  unknown  

1 


~ 

a 

c3 

** 

^2 

« 

•«S> 
O 

E 

O 

QJ 

3 

3 

^ 

i 

"S 

fc< 

§ 

4) 

Sf 

•i 

•* 

2 

:3 

1 

fi 

^ 

i 

si 

oe 

I 

I 
5 

1 

3 

£ 

•g 

« 

3 

•d 

•8 

£ 

t»a 

C3 

S 

a 

0! 
.2 

3 

ao 

i 

^M 

*s 

^g 

•S 

£    ? 

i  s 

5 

5       r- 

s 

*  ^ 

1.      | 

"§    £ 
S    « 

ii 

a,    ^ 

i  ^ 

223 


CO 

H 

W 


H  « 

5  M 

*M  CTv 

O  M 

O  M" 

CO 

«  ~ 


CO  *O  GO  iH  t- 
C^  C5GO  b-GO 
10  00^  O  r-^ 

^       C£Tr}^ 
<M        T«cd 


PQ 


^H 
< 

J 
I— I 

< 
« 


S 


S  Q  I 

MH     M       ,5 

MQ    § 

Is! 


OXJ     •'* 
Pn     ^^ 


W  ID 
ffi  O 
H  O 

fe 
M  & 

38 

^  2 
a  ^ 


I 


^ 
GO 
CO 


l>  IO  T-T  (M  TH  GO"  CO 
(M  CO  CO  <M 


O"  rH  r-T  rH  < 


S 


:6    a 
dl    I 


4->    ^t 
CJ    D 

»1 

„»  S  S3  «U  "^ 

iliii 

3  §  §  d  5 

-naMDo 


0) 

a 


224 


1 

zs 
a 


ft! 
O 

td 

as 

H 


w 

O 


5 


I 

s 

(N 


$ 

i 


l  rH  00  i 

00  K3 


i 

Ci 
i  CO 


si 

CO 


a 

§QB 
^          fl 

bO 

a 


a 
s 


CO 
<jq 


5  O 
IO 


Africa 
Australia 


3 

_O 
73 

Tl 

^ 

2 

H 


226 


1 
Ij 

253 

!>•         rH 

CO        00 

CO 

o 

1 

i 

i 

i 

^ 

5 

) 

T-1 

lies  of  line  ope 
at  end  of  yea 

CO    CO       iO 

•  o  t^ 

•    CO    O5 

t>-         CO 

CO        <M 

O5    00 
00    <M        - 
O    <M 

,  —  *• 

i 

—  «\ 

rH 

<N 

r-H 

.  —  *• 

s 

CC 

-r 

0 

CO 

i"? 

GV 

rH 
05 
CO 

1 

CO 

S 

V 

I 

lO    O5 
rH 

rH    rH    O    O 

CO 

rH 
rH 

<M 

0 

rH 

0 

0 

0 

rH    rH 

<M 

0 

0 

•d      1 

3332 

O5    O5 

05 

05 

O5 

O5 

O5 

O5    O5 

O5 

Oi- 

Q 

c    .s 

>        T3 

O    rH    ^    rH 
CO    CO    CO    CO 

—    rH 
CO    CO 

CO 

CO 

i—  I 
CO 

rH 
CO 

rH 
CO 

rH    rH 
CO    CO 

rH 
CO 

i—i 
CO 

O 

w 
s 

H 
0 

>m  Official  Reports. 
ed  and  Privately  O 

Year  er 

June 
Decembei 
Decembei 
Decembei 

11 

1  1 

Decembei 

Decembei 

Decembe] 

Decembe] 

Decembe] 

Decembe] 
Decembei 

Decembei 

Decembe] 

\Y  MILEAG 

*° 

2 

CO 

•     05 
.     <p 

•   •  s 

RAILWJ 

United  States—  Private.  . 
United  Kingdom  —  Prival 

France  {  State  
1  Private  .  .  . 

f  State  
Germany0.  .  .  -j  Private.  .  . 
'  Prussia-H 

0) 

§ 

v~v 

q 

'£ 

•* 

t  Private.  .  . 

<—  v 

> 

i- 

1 

1 

1  Private  .  .  . 

1 

T 

f 

rH 

Switzerland.  /  State  
I  Private  .  .  . 

v»^ 

g 

i 

1 
(3 

'  1  Private  .  .  . 

226 


227 


w 

H 

I 


g  a 


§ 


05 

rH 
CO 


w 


a 


a 


CD  O 

2  8 


CO 

s 


S  8 

CO  <^ 

Lr  <xT 


CO 


w 

rH 

o 

§P 

CO 

H 

s 

[^ 

35 

PH  M 

iO 

t—« 

C£ 

O 

! 

as 

§      s^ 

r-T 

CO 

rH 

CO 

g 

'   CO 

rH 

<^ 

^* 

^ 

O5 

o 

I— 

1C 

Q 

01 

^  ^ 

8" 

OC 

r- 

S! 

\*j 

•B 

fa   OQ 

^< 

<j  ^W 

CO 

*& 

w  & 

>• 

10 

%a 

< 

rH* 

o 

$5 

i 

rH 

1 

M 

Jj 

i 

' 

P^ 

1 

I 

1 

03 
\ 

to 
™ 

s 

g 

\ 

"c 

^ 

n 

k* 

O                         y 

c 

1 

B 

1 

C 

8 

<J 

C 

r5 

2 

^ 

2 

-2 

0 

2 

s 

>. 

4> 

'    E 

Bs 

M 

{25 

h-t 

OQ 

i 

tern  district  : 
Railway  main 

Improved  fan 

them  district  : 

"Railwav  TYiiiir 

1 
'    n 

ri 

:    c 

i,! 

i    is  'f 

)     -C     £ 

;    -s    g 

>  fl  g 

j-  s  ^ 

'         <D      r? 

<        «      ^ 

j 

j] 

d  Decrease. 

228 


J, 


B 


g   5 

g 


ccTacT 

rH  CO 
OCO 


S 


, 

* 


229 


fl£S5    co*o 
<D  <LI  r* 


<f    <l»     | 

^  s| 


I 


S 


10      c<i 

•^t1         CO 

icococo 


s 

Si 

e^J 


10         CO 
GO         O5 

OOC<irHcdc<icOCO'-'QOO 


SC 
•* 

otTr 


h 

§ 


91 

% 


230 


231 


-£  tn   00  CD 

Ns 


CO  CO  lO  t-  O  *O  l>-  CD  C<J  GO 


.      lOrH 
^     t^  CO 


10  Oi  CO  10  00  1C  Oi 


O 

g 


I  rf3 


232 


i 

r                                  iJO            p. 

.    O5    CD           03            O    ^ 

)     CO 

o3  E 

—     "^t"     CO              *-i               ^     ^ 

OT 

o    O    ?-           <X>            o    CS 

I     lO 
5     CD 

J 

1 

^                  03           ^ 

o"^ 

Jd 

o 

— 

,.,'*-' 

>     1C 

<D 

1   S    ^        5         £   )r 

;  oc 

CO 

g 

0 
03 

^  i-T                      "o  -^ 

^                                                         CJ 

•       TJH 

atinued). 

.1 

0 

f§ 

.NSPORTATI 

ti  average 

,. 

'ill   1    % 
****'-<    1     ^5 

CD 

VGRICULTURE—  (Coi 

the  Bureau  of  Railway 

CROP  TO  PURCHASE  TR^ 

o 

I 

o 
0 

r 

0) 

-°     i 
3      *.» 

d°     ^ 

'S 
^o 

1899.  1911.  1809. 

1,008  1,448  1,843 
379  555  693 

>unts  of  transportation  p 

Corn. 
fifi  2 

!i 

^M 

H— 

IP 

03 

^ 

r* 

Q 

° 

M 

T^ 

r                     * 

S5 

^§- 

«3 

§ 

rS 

-•  S  ^     j§ 

—    Oi^  t-         ^, 

CO 

k 

H 

0 

d 

•2 

>l 

J 

.2 

"-4J 

i  I- 

'«  £ 

JJ 

to 

P 

03 

0 

.  10   c^         pp    Q 

> 

K 

< 

hi 

O 

»g 

§    J^    ^           0    'Q 

d 

^ 

h 

O 

OH 
OQ 

d 

03 

to                             j3     co 

^ 

| 

04 

2 

i-H 
T—  1 

«*-»     0 

w 

H 

05 

O     H 

^ 

1 

o 

03 

0}      O 

J    fs 

J 

d 
d 
o 

1 

»  1   1  §    « 

1 

g 

rH 

QJ          flj                   Q>       *ti                     <i 

s~ 
<U 

03 

d 

.Ti    fcc       OH  °       n: 

2 

S    g        o  "3        E 

I 

H 

o4 

d    $      S   3       c 

0     .*         ^     d           c 

1 

§ 

H  PH             o       E- 

r^ 

233 


i 

5 

s 

o 

§ 

sa 
s 

§ 

5 
CS 


1 

5 


H 

H-3 

£ 
O 

hH 
« 

o 

< 

p 

25 
< 

GO 


5  % 

ft    .g 
ft     s 

9 

oq 


fc, 


3 

G> 


! 

:k 

!H 

\% 


2,14 


CO 


2    rH  OO 

§g 

o"  oo~ 


W 

H 


Q     8 


S 


00  rH^CD 

cK^co 

rH  rH  rH 

CD  rH  lO 
^JN^J 

CD   T^O^ 


<N  CO  CO  C 

O  O  CO  rH 


rH  CD 


oa 

rt 
« 
P 
H 

a 

< 

fe 
P 


P  s 

H  ^ 

r^  $ 

P  cq 

O  se 


t*"  IO 


BES  AND 


a 


w 
P 

P 

o 

s 


o 

M 


g 

s 

-< 

O 


5iO 
Jfe 

roo" 


s 


O  T-I  00 
- 


00^  ^rH 
CO  "^O  b- 
t^  CO  CO"  t»" 

og^t^^ 


5 


CQ 

ft 


CO  30  US  t- 


3 

I 

T3 


§*• 

ts 


p  -f~ 

V  £  +4  S  ft  g 


P«M 

a  p 


p  4->    GO  CO    y    Q 

Illllil 
III    I 


235 


P   S 


5 

®oo 

0^       O 

i 

T-T  of  of 

1C  CO  HH 

00   TH   Tfr< 

iO        Of 

3    g 

0 

I-  00  O 

O        CD 

"^t1 

IO  CO  O 

00^        ii^ 

T-l 

CD"  of 

C5             TH 

M 

£ 

'o 

.S 

«J 

4-> 

rfi 

O 

S 

3 

S/2 

1 

t£  P 

.    rt)   n^ 

JS2  §i  S 

G 

o3  rt   M 

<W 

•E  ^^ 

E 

o 

<D           02 

OJ   <0 

35 

5*s  3 

aS§ 

1 

B£ 
2^ 

82 

go 

rO                        P 

gols 

1*11 

|a^s 

1  t 

£    ^ 

3 

i 

3    <D    ksn-j  ^j    G  r^3    CS    S 

KfHlilli 


^-§88 

!:llf5i 


o 
n  n 
u 
non- 
er  could 


o  aS5  f-      u  H  " 

sis.i.-glll'a^ 

l^tljtlll 

|sNg»  l^^'^l 

S.»£?!|g5oSo 
«  fe  S  fr  ftft0  «  3  a 

•fl    t*  r_,    (rf    «}       fc         -£    °    t-t 


236 


3 


o  V*i 

I 

& 


W    ^  £ 


O 


, 
95, 


,602,152 
,474,679 


,428,511 
2,273 


,2 
,33 


961, 
48, 


a 

a 

M 

o> 

02 

0) 

bfi  bfl 

d  £ 


cs      ft. 9 


o  w~  o  of 

_  d  ,2  d  M 

cd  X  O  ^  oj 

*&H      H 


,926,426,134 


4,241,30 


!8 


IS  8 
1  g 

.  d 
S° 


2    V.2 


g|g 

00  (N  ITS 
CO  00 


O5  10 
<  b- 

>  ITS 


35! 


S«>« 

Oico 


TJH  O 

co  Tj^S 

TH  GO  § 

cojFl^ 

CO  b^-^ 
CD  b- 
C^^l 
O 

TH 

M- 


:  : 

•    • 

55 

•    . 

a 

.  3 

a 

d 

Tti    ^ 

d 

t-> 

i-S 

s1 

-^ 

g* 

1 

^ 

§a. 

3 

d 

a'S 

§  e 

o 

E 

S  *- 

a 


INDEX  TO  NAMES. 


Page 

ACWORTH,  W.  M.,  Railway  Economist  of  Great  Britain. .    39, 

102,  120,   187 

ADAMS,  H.   C.,  Professor  of  Political  Economy  and  Fi- 
nance,   University    of   Michigan ;    Former    Statistician 

Interstate  Commerce  Commission 121 

BAKER,  RAY  STANNARD,  Magazine  Writer 103 

BRISBANE,  -ARTHUR,  Editor  New  York  Journal 24 

BROWN,  W.  C.,  President  New  York  Central  Lines .   22,  80, 165 
BRYCE,  JAMES,  Former  British  Ambassador  to  the  United 
States  and  Author  of  "The  American  Commonwealth".    176 

BUREAU  OF  RAILWAY  ECONOMICS 191 

BURTON,  T.  E.,  United  States  Senator  from  Ohio,  Chair- 
man of  National  Waterways  Commission 190 

BUSH,  B.  F.,  President  Missouri-Pacific  System 107,  157 

CANNON,  JOSEPH   G.,   Former  Speaker  of  the   House   of 

Representatives 28 

CARTER,    W.    S.,    President    Brotherhood    of    Locomotive 

Firemen  and  Engineers. 164 

CECIL,  Hon.  EVELYN,  Member  of  Parliament 177 

CHAMBER  OF  COMMERCE  OF  THE  STATE  OF  NEW  YORK.  . .     96 
CLEVELAND,  FREDERICK  A.,  Chairman  of  the  President's 

Economy  and  Efficiency  Commission 159 

COMMISSION    IN    ARBITRATION    BETWEEN    THE   EASTERN 
RAILROADS    AND    THE    BROTHERHOOD    OF    LOCOMOTIVE 

ENGINEERS   44,  66,  68, 137 

COMPTROLLER  OF  CURRENCY,  Report  of 38 

CUNNINGHAM,  WILLIAM  J.,  Professor  of  Political  Econ- 
omy, Harvard  University 71, 153 

DAYTON,  THADDEUS  S.,  Retired  Merchant 58 

DELANO,  F.  A.,  Receiver  of  Wabash  Railroad 89, 121, 193 

DEWSNUP,  ERNEST  R.,  Professor  of  Railway  Economics, 

University  of  Illinois 178 

DILLON,  SIDNEY,  Former  President  of  the  Union  Pacific 
Railroad 23 

237 


238 

DUNN,  S.  O.,  Editor  Railway  Age  Gazette Ill,  142, 165 

ELLIOTT,  HOWARD,  President  Northern  Pacific  Railway . .    17, 
34,  63,  65,  106,  114,  139,  147,  149,  155 

EMERSON,  RALPH  WALDO 26 

ESCHER,  FRANKLIN,  Editor  "Investments" 101, 

105,  129,  163,  167 

FAGAN,  JAMES  O.,  Writer  and  Railway  Signalman 36 

FINK,  HENRY,  Late  Chairman  Norfolk  and  Western  Rail- 
road   A .  .    121,  145 

FINLEY,  W.  W.,  President  Southern  Railway 29, 

69,  83,  112,  122,  146,  182 

Foss,  EUGENE  N.,  Governor  of  Massachusetts 184 

GAINES,  MORRILL  W.,  Economist 12,  133 

GUYOT,    YVES,    Economist ;    Former    Minister    of    Public 

Works,   France 179 

HADLEY,  ARTHUR  T.,   President  Yale  University,  Author 

of  "Railroad  Transportation" , 108,  126,  174,  181 

HAINES,  HENRY  STEVENS,  Writer  on  Railway  Problems  ; 
Former  President  American  Railway  Association .    16,  70,  72 

HARRIMAN,  E.  H 88 

HARRISON,  FAIRFAX,  President  Chicago,  Indianapolis  and 

Louisville  Railway 184,  185 

HILL,  JAMES  J.,  Former  President  Great  Northern  Rail- 
way        15,  52,  59,  65,  93,  168,  183 

HINES,  WALKER  D.,  General  Counsel  Atchison,  Topeka  & 

Santa  Fe  Railway 113,  122,  185 

HOLDEN,    J.    F.,    Vice-President    Kansas    City    Southern 

Railway   183 

HUBBARD,  ELBERT,  Editor  and  Publisher 26 

HUBBARD,   GARDINER   G.,   Founder  of   the   National   Geo- 
graphic Society 27 

HUGHES,  CHARLES  E.,  Justice  of  the  Supreme  Court.   135,  176 

INTERSTATE  COMMERCE  COMMISSION 41,  109,  120 

JANDRON,  FRANCIS  LYSTER 63 

JEFFREY,  JAMES  C.,  Attorney 179 

JOHNSON,   EMORY    R.,   Professor   of   Transportation   and 

Commerce,  University  of  Pennsylvania 18 

JOHNSON,  L.  E.,  President  Norfolk  and  Western  Railway.    115 
KELLOGG,  C.  D.,  Secretary  American  Railroad  Employees' 

and  Investors'  Association 17 

KEYS,  C.  M.,  Financial  Writer 45,  166 

KNAPP,  MARTIN  A.,  Former  Chairman  of  Interstate  Com- 
merce Commission 65,  143,  157 

KRUTTSCHNITT,  JULIUS,  Chairman  Executive  Committee, 
Southern  Pacific  Railway 40 


289 

LANE,  FRANKLIN  K.,  Former  Member  of  Interstate  Com- 
merce Commission,  Secretary  of  the  Interior 11,  71 

LAUGHLIN,  JAMES  LAURENCE,  Professor  of  Political  Econ- 
omy, University  of  Chicago 36,  144 

LEROY-BEAULIEU,  PIERRE,  Economist 180 

LOREE,  L.  F.,  President  Delaware  and  Hudson  Railroad.     24, 

,  44,  66,  91,  126,  136 

LOVETT,  R.  S.,  Chairman  Executive  Committee,  Union 
Pacific  Railway 109,  116,  122,  158 

Low,  A.  MAURICE,  Journalist  and  Author 75,  142 

McCALL,  SAMUEL  W.,  Member  of  Congress 110,  161 

MCCHORD,  C.  C.,  Member  of  Interstate  Commerce  Com- 
mission    57 

MCPHERSON,  L.  G.,  Director  Bureau  of  Railway  Econom- 
ics    19,  41,  48,  55,  124,  126,  129,  131,  148,  187,  197 

MATHER,  ROBERT,  Former  President  Rock  Island  Com- 
pany    13,  35,  132,  150 

MEAD,  EDWARD  SHERWOOD,  Former  Assistant  Professor  of 
Finance  in  the  Wharton  School  of  Finance  and  Economy  14 

MILLER,  DARIUS,  President  Chicago,  Burlington  and 
Quincy  Railroad 106,  138 

MONEY  TRUST  INVESTIGATION. 151 

MORRISSEY,  P.  H.,  Former  Grand  Master  Brotherhood  of 
Railroad  Trainmen 65,  67,  73,  164 

MOULTON,  H.  G.,  Professor  of  Political  Economy,  Uni- 
versity of  Chicago 190 

MUDGE,  H.  U.,  President  Chicago,  Rock  Island  and  Pa- 
cific Railway 13 

NEWCOMB,  H.  T.,  Lawyer  and  Author  of  "Railway  Eco- 
nomics"    127 

OTIS,  CHARLES  E.,  Master  in  Chancery,  U.  S.  Circuit 
Court,  District  of  Minnesota .  85 

PORTER,  HORACE,  Soldier,  Lawyer,  Diplomat,  and  Railway 
President 107,  145 

POWELL,  FRED  WILBUR,  Economist 94 

PRIESTLY,  NEVILLE,  Appointed  by  the  British  Govern- 
ment to  Make  an  Investigation  of  the  Methods  of 
American  Railways 53 

PROUTY,  CHARLES  A.,  Member  of  Interstate  Commerce 
Commission 74,  87,  97,  118 

RAILROAD  SECURITIES  COMMISSION 169, 170, 171, 172 

RAILWAY  AGE  GAZETTE 57 

RAILWAY    RECORD 81, 149 

RANKIN,  GEORGE  A.,  Writer  on  Transportation 56,  89 


240 

REA,  SAMUEL,  President  Pennsylvania  Railroad 33, 

49,  82,  86,  98,  125 
REYNOLDS,    A.    E.,    Former    President    of    the    National 

Grain  Dealers'  Association 32 

RIPLEY,  E.  P.,  President  Atchison,  Topeka  and  Santa  Fe 

Railway 25, 118,  123 

ROOSEVELT,  THEODORE,  Former  President  of  the  United 

States    35,  94,  90 

Ross,  W.  L.,  President  Toledo,  St.  Louis  &  Western  Rail- 
road        16,  141, 146 

SCHURMAN,  JACOB  GOULD,  President  Cornell  University. .   176 
SEWALL,  E.  D.,  Vice-President  Chicago,  Milwaukee  &  St. 

Paul  Railway 97 

SHONTS,    THEODORE    P.,    President    Interborough    Rapid 

Transit  Company  of  New  York 90 

SPROULE,  WILLIAM,  President  Southern  Pacific  Co. . .   74, 162 

STERNE,  SIMON,  Lawyer  and  Author 15 

STONE,   WARREN    S.,    Grand   Chief   of   the   International 

Brotherhood  of  Engineers 42,  83 

STUART,  J.  C.,  Vice-President  Erie  Railroad 72 

STUBBS,  J.  C.,  Former  Director  of  Traffic  of  the  Southern 

Pacific  and  Union  Pacific  Railroads 21 

SUN,  NEW  YORK 125 

TAFT,    WILLIAM    H.,    Former    President   of    the    United 

States    136,  175 

THOMPSON,  SLASON,  Manager  Bureau  of  Railway  News 

and   Statistics 180 

TIMES,  LONDON 30,  47,  59 

TRUEMAN,  CHARLES  D.,  Railway  Official 50 

TRUMBULL,  FRANK,  Chairman  Chesapeake  &  Ohio  Rail- 
way      64,  98 

VAN  DEN  BERG,  Y.,  Railway  President 123 

VAN  WAQENEN,  A.,  Writer  on  Transportation 128 

WALL  STREET  JOURNAL 75,  99 

WHITBIDGE,  F.  W 123 

WILLAED,  DANIEL,  President  Baltimore  and  Ohio   Rail- 
road        60, 123,  140,  152 

WILLIAMS,  W.  H.,  Third   Vice  President  Delaware  and 

Hudson  Company 51,  124 

WILSON,  WOODROW,  President  of  the  United  States 174 

WINCHELL,  B.  L.,  President  St.  Louis  and  San  Francisco 

Railroad   92, 154, 160 

WORTH INQTON,  B.  A.,  President  Chicago  and  Alton  Bail- 
road , 77,  88 


THIS  BOOK  IS  DUE  ON  THE  LAST  DATE 
STAMPED  BELOW 


AN  INITIAL  FINE  OF  25  CENTS 

WILL  BE  ASSESSED  FOR  FAILURE  TO  RETURN 
THIS  BOOK  ON  THE  DATE  DUE.  THE  PENALTY 
WILL  INCREASE  TO  SO  CENTS  ON  THE  FOURTH 
DAY  AND  TO  $1.OO  ON  THE  SEVENTH  DAY 
OVERDUE. 


DEC  o  1 1996 


Mm    im? 


U.C.  BERKELEY  LIBRARIES 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 


